Correlation Between Madison Square and Yamaha Corp

Can any of the company-specific risk be diversified away by investing in both Madison Square and Yamaha Corp 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 Yamaha Corp 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 Yamaha Corp DRC, you can compare the effects of market volatilities on Madison Square and Yamaha Corp 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 Yamaha Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madison Square and Yamaha Corp.

Diversification Opportunities for Madison Square and Yamaha Corp

0.78

Correlation Coefficient

Madison Square  Yamaha Corp

Poor diversification

The 3 months correlation between Madison and Yamaha is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Madison Square Garden and Yamaha Corp DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yamaha Corp DRC 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 Yamaha Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yamaha Corp DRC has no effect on the direction of Madison Square i.e., Madison Square and Yamaha Corp go up and down completely randomly.

Pair Corralation between Madison Square and Yamaha Corp

Given the investment horizon of 90 days Madison Square Garden is expected to generate 0.91 times more return on investment than Yamaha Corp. However, Madison Square Garden is 1.1 times less risky than Yamaha Corp. It trades about -0.07 of its potential returns per unit of risk. Yamaha Corp DRC is currently generating about -0.12 per unit of risk. If you would invest  4,052  in Madison Square Garden on August 31, 2024 and sell it today you would lose (353.00) from holding Madison Square Garden or give up 8.71% of portfolio value over 90 days.

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

Madison Square Garden  vs.  Yamaha Corp DRC

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.

Yamaha Corp DRC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yamaha Corp DRC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Madison Square and Yamaha Corp

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

The idea behind Madison Square Garden and Yamaha Corp DRC 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.