Correlation Between The Jensen and Madison Investors
Can any of the company-specific risk be diversified away by investing in both The Jensen and Madison Investors 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 The Jensen and Madison Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Jensen Portfolio and Madison Investors Fund, you can compare the effects of market volatilities on The Jensen and Madison Investors 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 The Jensen with a short position of Madison Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Jensen and Madison Investors.
Diversification Opportunities for The Jensen and Madison Investors
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between The and Madison is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding The Jensen Portfolio and Madison Investors Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Investors and The Jensen 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 The Jensen Portfolio are associated (or correlated) with Madison Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Investors has no effect on the direction of The Jensen i.e., The Jensen and Madison Investors go up and down completely randomly.
Pair Corralation between The Jensen and Madison Investors
Assuming the 90 days horizon The Jensen is expected to generate 1.26 times less return on investment than Madison Investors. But when comparing it to its historical volatility, The Jensen Portfolio is 1.21 times less risky than Madison Investors. It trades about 0.41 of its potential returns per unit of risk. Madison Investors Fund is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest 2,898 in Madison Investors Fund on November 2, 2024 and sell it today you would earn a total of 176.00 from holding Madison Investors Fund or generate 6.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
The Jensen Portfolio vs. Madison Investors Fund
Performance |
| Timeline |
| Jensen Portfolio |
| Madison Investors |
The Jensen and Madison Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The Jensen and Madison Investors
The main advantage of trading using opposite The Jensen and Madison Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Jensen position performs unexpectedly, Madison Investors 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 Investors will offset losses from the drop in Madison Investors' long position.| The Jensen vs. Clipper Fund Inc | The Jensen vs. Parnassus E Equity | The Jensen vs. Mairs Power Growth | The Jensen vs. Sound Shore Fund |
| Madison Investors vs. Madison Mid Cap | Madison Investors vs. Madison Moderate Allocation | Madison Investors vs. Madison Moderate Allocation | Madison Investors vs. Madison Investors Fund |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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