Correlation Between JAKKS Pacific and Madison Square

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

By analyzing existing cross correlation between JAKKS Pacific and Madison Square Garden, you can compare the effects of market volatilities on JAKKS Pacific and Madison Square 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 JAKKS Pacific with a short position of Madison Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAKKS Pacific and Madison Square.

Diversification Opportunities for JAKKS Pacific and Madison Square

-0.28

Correlation Coefficient

JAKKS Pacific  Madison Square

Very good diversification

The 3 months correlation between JAKKS and Madison is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding JAKKS Pacific and Madison Square Garden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Square Garden and JAKKS Pacific 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 JAKKS Pacific are associated (or correlated) with Madison Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Square Garden has no effect on the direction of JAKKS Pacific i.e., JAKKS Pacific and Madison Square go up and down completely randomly.

Pair Corralation between JAKKS Pacific and Madison Square

Given the investment horizon of 90 days JAKKS Pacific is expected to generate 1.57 times more return on investment than Madison Square. However, JAKKS Pacific is 1.57 times more volatile than Madison Square Garden. It trades about 0.1 of its potential returns per unit of risk. Madison Square Garden is currently generating about -0.07 per unit of risk. If you would invest  2,385  in JAKKS Pacific on August 31, 2024 and sell it today you would earn a total of  415.00  from holding JAKKS Pacific or generate 17.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

JAKKS Pacific  vs.  Madison Square Garden

JAKKS Pacific

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JAKKS Pacific are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, JAKKS Pacific disclosed solid returns over the last few months and may actually be approaching a breakup point.

Madison Square Garden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Madison Square Garden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with JAKKS Pacific and Madison Square

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

The idea behind JAKKS Pacific and Madison Square Garden 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.