Correlation Between Madison Core and Madison Aggressive
Can any of the company-specific risk be diversified away by investing in both Madison Core and Madison Aggressive 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 Core and Madison Aggressive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Madison Core Bond and Madison Aggressive Allocation, you can compare the effects of market volatilities on Madison Core and Madison Aggressive 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 Core with a short position of Madison Aggressive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madison Core and Madison Aggressive.
Diversification Opportunities for Madison Core and Madison Aggressive
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Madison and Madison is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Madison Core Bond and Madison Aggressive Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Aggressive and Madison Core 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 Core Bond are associated (or correlated) with Madison Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Aggressive has no effect on the direction of Madison Core i.e., Madison Core and Madison Aggressive go up and down completely randomly.
Pair Corralation between Madison Core and Madison Aggressive
Assuming the 90 days horizon Madison Core Bond is expected to generate 0.32 times more return on investment than Madison Aggressive. However, Madison Core Bond is 3.08 times less risky than Madison Aggressive. It trades about 0.07 of its potential returns per unit of risk. Madison Aggressive Allocation is currently generating about -0.06 per unit of risk. If you would invest 881.00 in Madison Core Bond on October 25, 2024 and sell it today you would earn a total of 3.00 from holding Madison Core Bond or generate 0.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Madison Core Bond vs. Madison Aggressive Allocation
Performance |
| Timeline |
| Madison Core Bond |
| Madison Aggressive |
Madison Core and Madison Aggressive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Madison Core and Madison Aggressive
The main advantage of trading using opposite Madison Core and Madison Aggressive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Madison Core position performs unexpectedly, Madison Aggressive 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 Aggressive will offset losses from the drop in Madison Aggressive's long position.| Madison Core vs. Nexpoint Real Estate | Madison Core vs. Short Real Estate | Madison Core vs. Texton Property | Madison Core vs. Jhancock Real Estate |
| Madison Aggressive vs. Madison Covered Call | Madison Aggressive vs. Madison Diversified Income | Madison Aggressive vs. Madison Core Bond | Madison Aggressive vs. Madison Funds |
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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