Correlation Between Madison Core and Madison Covered
Can any of the company-specific risk be diversified away by investing in both Madison Core and Madison Covered 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 Covered 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 Covered Call, you can compare the effects of market volatilities on Madison Core and Madison Covered 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 Covered. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madison Core and Madison Covered.
Diversification Opportunities for Madison Core and Madison Covered
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Madison and Madison is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Madison Core Bond and Madison Covered Call in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Covered Call 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 Covered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Covered Call has no effect on the direction of Madison Core i.e., Madison Core and Madison Covered go up and down completely randomly.
Pair Corralation between Madison Core and Madison Covered
Assuming the 90 days horizon Madison Core is expected to generate 2.22 times less return on investment than Madison Covered. But when comparing it to its historical volatility, Madison Core Bond is 1.53 times less risky than Madison Covered. It trades about 0.07 of its potential returns per unit of risk. Madison Covered Call is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 660.00 in Madison Covered Call on October 25, 2024 and sell it today you would earn a total of 5.00 from holding Madison Covered Call or generate 0.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Madison Core Bond vs. Madison Covered Call
Performance |
| Timeline |
| Madison Core Bond |
| Madison Covered Call |
Madison Core and Madison Covered Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Madison Core and Madison Covered
The main advantage of trading using opposite Madison Core and Madison Covered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Madison Core position performs unexpectedly, Madison Covered 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 Covered will offset losses from the drop in Madison Covered'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 Covered vs. Vanguard Total Stock | Madison Covered vs. Vanguard 500 Index | Madison Covered vs. Vanguard Total Stock | Madison Covered vs. Vanguard Total Stock |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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