Correlation Between Madison Mid and Matrix Advisors

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

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

Diversification Opportunities for Madison Mid and Matrix Advisors

0.86

Correlation Coefficient

Madison Mid  Matrix Advisors

Very poor diversification

The 3 months correlation between Madison and Matrix is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Madison Mid Cap and Matrix Advisors Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matrix Advisors Value and Madison Mid 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 Madison Mid Cap are associated (or correlated) with Matrix Advisors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matrix Advisors Value has no effect on the direction of Madison Mid i.e., Madison Mid and Matrix Advisors go up and down completely randomly.

Pair Corralation between Madison Mid and Matrix Advisors

Assuming the 90 days horizon Madison Mid is expected to generate 1.65 times less return on investment than Matrix Advisors. In addition to that, Madison Mid is 1.08 times more volatile than Matrix Advisors Value. It trades about 0.12 of its total potential returns per unit of risk. Matrix Advisors Value is currently generating about 0.21 per unit of volatility. If you would invest  9,766  in Matrix Advisors Value on September 13, 2024 and sell it today you would earn a total of  1,056  from holding Matrix Advisors Value or generate 10.81% return on investment over 90 days.

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

Madison Mid Cap  vs.  Matrix Advisors Value

Madison Mid Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Mid Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Madison Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Matrix Advisors Value

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Matrix Advisors Value are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Matrix Advisors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Madison Mid and Matrix Advisors

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

The idea behind Madison Mid Cap and Matrix Advisors Value 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.