Correlation Between Europac Gold and Madison Small

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

By analyzing existing cross correlation between Europac Gold Fund and Madison Small Cap, you can compare the effects of market volatilities on Europac Gold and Madison Small 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 Europac Gold with a short position of Madison Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europac Gold and Madison Small.

Diversification Opportunities for Europac Gold and Madison Small

-0.42

Correlation Coefficient

Europac Gold  Madison Small

Very good diversification

The 3 months correlation between Europac and Madison is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Europac Gold Fund and Madison Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Small Cap and Europac Gold 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 Europac Gold Fund are associated (or correlated) with Madison Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Small Cap has no effect on the direction of Europac Gold i.e., Europac Gold and Madison Small go up and down completely randomly.

Pair Corralation between Europac Gold and Madison Small

Assuming the 90 days horizon Europac Gold Fund is expected to under-perform the Madison Small. In addition to that, Europac Gold is 2.15 times more volatile than Madison Small Cap. It trades about -0.09 of its total potential returns per unit of risk. Madison Small Cap is currently generating about 0.2 per unit of volatility. If you would invest  1,156  in Madison Small Cap on September 14, 2024 and sell it today you would earn a total of  151.00  from holding Madison Small Cap or generate 13.06% return on investment over 90 days.

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

Europac Gold Fund  vs.  Madison Small Cap

Europac Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Europac Gold Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Madison Small Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Small Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Madison Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Europac Gold and Madison Small

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

The idea behind Europac Gold Fund and Madison Small Cap 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.