Correlation Between Madison Square and World Wrestling

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

Diversification Opportunities for Madison Square and World Wrestling

-0.05

Correlation Coefficient

Madison Square  World Wrestling

Good diversification

The 3 months correlation between Madison and World is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Madison Square Garden and World Wrestling Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Wrestling Ente 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 World Wrestling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Wrestling Ente has no effect on the direction of Madison Square i.e., Madison Square and World Wrestling go up and down completely randomly.

Pair Corralation between Madison Square and World Wrestling

If you would invest  20,306  in Madison Square Garden on September 12, 2024 and sell it today you would earn a total of  2,521  from holding Madison Square Garden or generate 12.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Madison Square Garden  vs.  World Wrestling Entertainment

Madison Square Garden

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Square Garden are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, Madison Square may actually be approaching a critical reversion point that can send shares even higher in January 2025.

World Wrestling Ente

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days World Wrestling Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, World Wrestling is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Madison Square and World Wrestling

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

The idea behind Madison Square Garden and World Wrestling Entertainment 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.