Correlation Between Scottish Mortgage and MidCap Financial

Can any of the company-specific risk be diversified away by investing in both Scottish Mortgage and MidCap Financial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Scottish Mortgage and MidCap Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Scottish Mortgage Investment and MidCap Financial Investment, you can compare the effects of market volatilities on Scottish Mortgage and MidCap Financial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Scottish Mortgage with a short position of MidCap Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scottish Mortgage and MidCap Financial.

Diversification Opportunities for Scottish Mortgage and MidCap Financial

0.62

Correlation Coefficient

Scottish Mortgage  MidCap Financial

Poor diversification

The 3 months correlation between Scottish and MidCap is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Scottish Mortgage Investment and MidCap Financial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MidCap Financial Inv and Scottish Mortgage is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Scottish Mortgage Investment are associated (or correlated) with MidCap Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MidCap Financial Inv has no effect on the direction of Scottish Mortgage i.e., Scottish Mortgage and MidCap Financial go up and down completely randomly.

Pair Corralation between Scottish Mortgage and MidCap Financial

Assuming the 90 days trading horizon Scottish Mortgage Investment is expected to generate 0.8 times more return on investment than MidCap Financial. However, Scottish Mortgage Investment is 1.25 times less risky than MidCap Financial. It trades about 0.17 of its potential returns per unit of risk. MidCap Financial Investment is currently generating about 0.05 per unit of risk. If you would invest  1,121  in Scottish Mortgage Investment on May 5, 2025 and sell it today you would earn a total of  151.00  from holding Scottish Mortgage Investment or generate 13.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Scottish Mortgage Investment  vs.  MidCap Financial Investment

Scottish Mortgage

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Scottish Mortgage Investment are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Scottish Mortgage may actually be approaching a critical reversion point that can send shares even higher in September 2025.

MidCap Financial Inv

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MidCap Financial Investment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MidCap Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Scottish Mortgage and MidCap Financial

The main advantage of trading using opposite Scottish Mortgage and MidCap Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scottish Mortgage position performs unexpectedly, MidCap Financial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in MidCap Financial will offset losses from the drop in MidCap Financial's long position.

The idea behind Scottish Mortgage Investment and MidCap Financial Investment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.