Correlation Between Madison Funds and Madison Dividend
Can any of the company-specific risk be diversified away by investing in both Madison Funds and Madison Dividend 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 Funds and Madison Dividend into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Madison Funds and Madison Dividend Income, you can compare the effects of market volatilities on Madison Funds and Madison Dividend 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 Funds with a short position of Madison Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madison Funds and Madison Dividend.
Diversification Opportunities for Madison Funds and Madison Dividend
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Madison and Madison is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Madison Funds and Madison Dividend Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Dividend Income and Madison Funds 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 Funds are associated (or correlated) with Madison Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Dividend Income has no effect on the direction of Madison Funds i.e., Madison Funds and Madison Dividend go up and down completely randomly.
Pair Corralation between Madison Funds and Madison Dividend
Assuming the 90 days horizon Madison Funds is expected to generate 0.99 times more return on investment than Madison Dividend. However, Madison Funds is 1.01 times less risky than Madison Dividend. It trades about 0.02 of its potential returns per unit of risk. Madison Dividend Income is currently generating about 0.01 per unit of risk. If you would invest 2,503 in Madison Funds on December 11, 2024 and sell it today you would earn a total of 125.00 from holding Madison Funds or generate 4.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Madison Funds vs. Madison Dividend Income
Performance |
| Timeline |
| Madison Funds |
| Madison Dividend Income |
Madison Funds and Madison Dividend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Madison Funds and Madison Dividend
The main advantage of trading using opposite Madison Funds and Madison Dividend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Madison Funds position performs unexpectedly, Madison Dividend 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 Dividend will offset losses from the drop in Madison Dividend's long position.| Madison Funds vs. Diversified Bond Fund | ||
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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