Correlation Between Madison Square and VITEC SOFTWARE

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

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

Diversification Opportunities for Madison Square and VITEC SOFTWARE

-0.44

Correlation Coefficient

Madison Square  VITEC SOFTWARE

Very good diversification

The 3 months correlation between Madison and VITEC is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Madison Square Garden and VITEC SOFTWARE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VITEC SOFTWARE GROUP and Madison Square 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 Square Garden are associated (or correlated) with VITEC SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VITEC SOFTWARE GROUP has no effect on the direction of Madison Square i.e., Madison Square and VITEC SOFTWARE go up and down completely randomly.

Pair Corralation between Madison Square and VITEC SOFTWARE

Assuming the 90 days horizon Madison Square Garden is expected to generate 0.52 times more return on investment than VITEC SOFTWARE. However, Madison Square Garden is 1.93 times less risky than VITEC SOFTWARE. It trades about 0.22 of its potential returns per unit of risk. VITEC SOFTWARE GROUP is currently generating about 0.03 per unit of risk. If you would invest  18,300  in Madison Square Garden on September 14, 2024 and sell it today you would earn a total of  3,300  from holding Madison Square Garden or generate 18.03% return on investment over 90 days.

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

Madison Square Garden  vs.  VITEC SOFTWARE GROUP

Madison Square Garden

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Square Garden are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Madison Square reported solid returns over the last few months and may actually be approaching a breakup point.

VITEC SOFTWARE GROUP

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VITEC SOFTWARE GROUP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, VITEC SOFTWARE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Madison Square and VITEC SOFTWARE

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

The idea behind Madison Square Garden and VITEC SOFTWARE GROUP 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.