Correlation Between Madison Core and Madison Small
Can any of the company-specific risk be diversified away by investing in both Madison Core and Madison Small 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 Small 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 Small Cap, you can compare the effects of market volatilities on Madison Core and Madison Small 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 Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madison Core and Madison Small.
Diversification Opportunities for Madison Core and Madison Small
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Madison and Madison is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Madison Core Bond and Madison Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Small Cap 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 Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Small Cap has no effect on the direction of Madison Core i.e., Madison Core and Madison Small go up and down completely randomly.
Pair Corralation between Madison Core and Madison Small
Assuming the 90 days horizon Madison Core Bond is expected to under-perform the Madison Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Madison Core Bond is 4.05 times less risky than Madison Small. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Madison Small Cap is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,133 in Madison Small Cap on August 28, 2024 and sell it today you would earn a total of 162.00 from holding Madison Small Cap or generate 14.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Madison Core Bond vs. Madison Small Cap
Performance |
| Timeline |
| Madison Core Bond |
| Madison Small Cap |
Madison Core and Madison Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Madison Core and Madison Small
The main advantage of trading using opposite Madison Core and Madison Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Madison Core position performs unexpectedly, Madison Small 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 Small will offset losses from the drop in Madison Small's long position.| Madison Core vs. Ab Global Risk | Madison Core vs. Western Asset High | Madison Core vs. Calvert High Yield | Madison Core vs. Pace High Yield |
| Madison Small vs. Invesco Global Real | Madison Small vs. Mainstay High Yield | Madison Small vs. Mfs Emerging Markets | Madison Small vs. Amg Timessquare Mid |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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