Correlation Between GM and Madison Diversified
Can any of the company-specific risk be diversified away by investing in both GM and Madison Diversified 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 GM and Madison Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Madison Diversified Income, you can compare the effects of market volatilities on GM and Madison Diversified 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 GM with a short position of Madison Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Madison Diversified.
Diversification Opportunities for GM and Madison Diversified
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Madison is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Madison Diversified Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Diversified and GM 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 General Motors are associated (or correlated) with Madison Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Diversified has no effect on the direction of GM i.e., GM and Madison Diversified go up and down completely randomly.
Pair Corralation between GM and Madison Diversified
If you would invest 1,496 in Madison Diversified Income on November 4, 2024 and sell it today you would earn a total of 0.00 from holding Madison Diversified Income or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 5.0% |
| Values | Daily Returns |
General Motors vs. Madison Diversified Income
Performance |
| Timeline |
| General Motors |
| Madison Diversified |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GM and Madison Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Madison Diversified
The main advantage of trading using opposite GM and Madison Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Madison Diversified 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 Diversified will offset losses from the drop in Madison Diversified's long position.The idea behind General Motors and Madison Diversified Income 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.| Madison Diversified vs. Columbia Moderate Growth | Madison Diversified vs. Lifestyle Ii Moderate | Madison Diversified vs. Voya Target Retirement | Madison Diversified vs. Blackrock Moderate Prepared |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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