Correlation Between Midland States and PC Connection

Can any of the company-specific risk be diversified away by investing in both Midland States and PC Connection 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 Midland States and PC Connection into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Midland States Bancorp and PC Connection, you can compare the effects of market volatilities on Midland States and PC Connection 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 Midland States with a short position of PC Connection. Check out your portfolio center. Please also check ongoing floating volatility patterns of Midland States and PC Connection.

Diversification Opportunities for Midland States and PC Connection

-0.1

Correlation Coefficient

Midland States  PC Connection

Good diversification

The 3 months correlation between Midland and CNXN is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Midland States Bancorp and PC Connection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PC Connection and Midland States 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 Midland States Bancorp are associated (or correlated) with PC Connection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PC Connection has no effect on the direction of Midland States i.e., Midland States and PC Connection go up and down completely randomly.

Pair Corralation between Midland States and PC Connection

Given the investment horizon of 90 days Midland States Bancorp is expected to under-perform the PC Connection. But the stock apears to be less risky and, when comparing its historical volatility, Midland States Bancorp is 1.08 times less risky than PC Connection. The stock trades about -0.19 of its potential returns per unit of risk. The PC Connection is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,989  in PC Connection on September 20, 2024 and sell it today you would earn a total of  61.00  from holding PC Connection or generate 0.87% return on investment over 90 days.

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

Midland States Bancorp  vs.  PC Connection

Midland States Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Midland States Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile fundamental drivers, Midland States may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PC Connection

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PC Connection has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, PC Connection is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Midland States and PC Connection

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

The idea behind Midland States Bancorp and PC Connection 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.