Correlation Between Mesirow Financial and 1919 Financial

Can any of the company-specific risk be diversified away by investing in both Mesirow Financial and 1919 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 Mesirow Financial and 1919 Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mesirow Financial Small and 1919 Financial Services, you can compare the effects of market volatilities on Mesirow Financial and 1919 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 Mesirow Financial with a short position of 1919 Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mesirow Financial and 1919 Financial.

Diversification Opportunities for Mesirow Financial and 1919 Financial

0.83

Correlation Coefficient

Mesirow Financial  1919 Financial

Very poor diversification

The 3 months correlation between Mesirow and 1919 is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Mesirow Financial Small and 1919 Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1919 Financial Services and Mesirow 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 Mesirow Financial Small are associated (or correlated) with 1919 Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1919 Financial Services has no effect on the direction of Mesirow Financial i.e., Mesirow Financial and 1919 Financial go up and down completely randomly.

Pair Corralation between Mesirow Financial and 1919 Financial

Assuming the 90 days horizon Mesirow Financial is expected to generate 1.61 times less return on investment than 1919 Financial. But when comparing it to its historical volatility, Mesirow Financial Small is 1.16 times less risky than 1919 Financial. It trades about 0.13 of its potential returns per unit of risk. 1919 Financial Services is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,986  in 1919 Financial Services on September 2, 2024 and sell it today you would earn a total of  443.00  from holding 1919 Financial Services or generate 14.84% return on investment over 90 days.

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

Mesirow Financial Small  vs.  1919 Financial Services

Mesirow Financial Small

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mesirow Financial Small are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Mesirow Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

1919 Financial Services

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in 1919 Financial Services are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, 1919 Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mesirow Financial and 1919 Financial

The main advantage of trading using opposite Mesirow Financial and 1919 Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mesirow Financial position performs unexpectedly, 1919 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 1919 Financial will offset losses from the drop in 1919 Financial's long position.

The idea behind Mesirow Financial Small and 1919 Financial Services 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.