Correlation Between Paramount Global and Madison Square

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

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

Diversification Opportunities for Paramount Global and Madison Square

0.59

Correlation Coefficient

Paramount Global  Madison Square

Very weak diversification

The 3 months correlation between Paramount and Madison is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Paramount Global Class 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 Paramount Global 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 Paramount Global Class 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 Paramount Global i.e., Paramount Global and Madison Square go up and down completely randomly.

Pair Corralation between Paramount Global and Madison Square

Assuming the 90 days horizon Paramount Global is expected to generate 2.59 times less return on investment than Madison Square. In addition to that, Paramount Global is 1.14 times more volatile than Madison Square Garden. It trades about 0.06 of its total potential returns per unit of risk. Madison Square Garden is currently generating about 0.18 per unit of volatility. If you would invest  20,577  in Madison Square Garden on September 4, 2024 and sell it today you would earn a total of  2,331  from holding Madison Square Garden or generate 11.33% return on investment over 90 days.

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

Paramount Global Class  vs.  Madison Square Garden

Paramount Global Class

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Paramount Global Class are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Paramount Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Madison Square Garden

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Square Garden are ranked lower than 14 (%) 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.

Pair Trading with Paramount Global and Madison Square

The main advantage of trading using opposite Paramount Global and Madison Square positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paramount Global 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 Paramount Global Class 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.