Correlation Between MidCap Financial and OFS Capital

Can any of the company-specific risk be diversified away by investing in both MidCap Financial and OFS Capital 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 MidCap Financial and OFS Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MidCap Financial Investment and OFS Capital Corp, you can compare the effects of market volatilities on MidCap Financial and OFS Capital 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 MidCap Financial with a short position of OFS Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of MidCap Financial and OFS Capital.

Diversification Opportunities for MidCap Financial and OFS Capital

0.17

Correlation Coefficient

MidCap Financial  OFS Capital

Average diversification

The 3 months correlation between MidCap and OFS is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and OFS Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OFS Capital Corp and MidCap Financial 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 MidCap Financial Investment are associated (or correlated) with OFS Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OFS Capital Corp has no effect on the direction of MidCap Financial i.e., MidCap Financial and OFS Capital go up and down completely randomly.

Pair Corralation between MidCap Financial and OFS Capital

Given the investment horizon of 90 days MidCap Financial Investment is expected to generate 0.77 times more return on investment than OFS Capital. However, MidCap Financial Investment is 1.29 times less risky than OFS Capital. It trades about 0.06 of its potential returns per unit of risk. OFS Capital Corp is currently generating about -0.01 per unit of risk. If you would invest  1,250  in MidCap Financial Investment on May 20, 2025 and sell it today you would earn a total of  49.00  from holding MidCap Financial Investment or generate 3.92% return on investment over 90 days.

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

MidCap Financial Investment  vs.  OFS Capital Corp

MidCap Financial Inv

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in MidCap Financial Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, MidCap Financial is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

OFS Capital Corp

Risk-Adjusted Performance

Weakest

Over the last 90 days OFS Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, OFS Capital 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 MidCap Financial and OFS Capital

The main advantage of trading using opposite MidCap Financial and OFS Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MidCap Financial position performs unexpectedly, OFS Capital 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 OFS Capital will offset losses from the drop in OFS Capital's long position.

The idea behind MidCap Financial Investment and OFS Capital Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.