Correlation Between Madison E and Madison Small

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

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

Diversification Opportunities for Madison E and Madison Small

-0.68

Correlation Coefficient

Madison E  Madison Small

Excellent diversification

The 3 months correlation between Madison and Madison is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Madison E Bond 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 Madison E 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 E Bond 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 Madison E i.e., Madison E and Madison Small go up and down completely randomly.

Pair Corralation between Madison E and Madison Small

Assuming the 90 days horizon Madison E Bond is expected to under-perform the Madison Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Madison E Bond is 3.71 times less risky than Madison Small. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Madison Small Cap is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,107  in Madison Small Cap on September 12, 2024 and sell it today you would earn a total of  169.00  from holding Madison Small Cap or generate 15.27% return on investment over 90 days.

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

Madison E Bond  vs.  Madison Small Cap

Madison E Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Madison E Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Madison E is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Madison Small Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Small Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Madison Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Madison E and Madison Small

The main advantage of trading using opposite Madison E and Madison Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Madison E 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 Madison E Bond 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.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.