Correlation Between Madison International and Madison Investors
Can any of the company-specific risk be diversified away by investing in both Madison International 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 Madison International and Madison Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Madison International Stock and Madison Investors Fund, you can compare the effects of market volatilities on Madison International 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 Madison International with a short position of Madison Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madison International and Madison Investors.
Diversification Opportunities for Madison International and Madison Investors
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Madison and Madison is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Madison International Stock and Madison Investors Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Investors and Madison International 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 International Stock 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 Madison International i.e., Madison International and Madison Investors go up and down completely randomly.
Pair Corralation between Madison International and Madison Investors
Assuming the 90 days horizon Madison International Stock is expected to under-perform the Madison Investors. But the mutual fund apears to be less risky and, when comparing its historical volatility, Madison International Stock is 1.05 times less risky than Madison Investors. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Madison Investors Fund is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 3,046 in Madison Investors Fund on September 3, 2024 and sell it today you would earn a total of 194.00 from holding Madison Investors Fund or generate 6.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Madison International Stock vs. Madison Investors Fund
Performance |
| Timeline |
| Madison International |
| Madison Investors |
Madison International and Madison Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Madison International and Madison Investors
The main advantage of trading using opposite Madison International and Madison Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Madison International 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 idea behind Madison International Stock and Madison Investors Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Madison Investors vs. Shelton Emerging Markets | Madison Investors vs. Angel Oak Multi Strategy | Madison Investors vs. T Rowe Price | Madison Investors vs. Jpmorgan Emerging Markets |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
Other Complementary Tools
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |