Correlation Between Madison International and Great-west Goldman
Can any of the company-specific risk be diversified away by investing in both Madison International and Great-west Goldman 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 Great-west Goldman 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 Great West Goldman Sachs, you can compare the effects of market volatilities on Madison International and Great-west Goldman 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 Great-west Goldman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madison International and Great-west Goldman.
Diversification Opportunities for Madison International and Great-west Goldman
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Madison and Great-west is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Madison International Stock and Great West Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Goldman 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 Great-west Goldman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Goldman has no effect on the direction of Madison International i.e., Madison International and Great-west Goldman go up and down completely randomly.
Pair Corralation between Madison International and Great-west Goldman
Assuming the 90 days horizon Madison International Stock is expected to generate 0.25 times more return on investment than Great-west Goldman. However, Madison International Stock is 4.01 times less risky than Great-west Goldman. It trades about 0.3 of its potential returns per unit of risk. Great West Goldman Sachs is currently generating about -0.16 per unit of risk. If you would invest 914.00 in Madison International Stock on November 3, 2024 and sell it today you would earn a total of 43.00 from holding Madison International Stock or generate 4.7% 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. Great West Goldman Sachs
Performance |
| Timeline |
| Madison International |
| Great West Goldman |
Madison International and Great-west Goldman Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Madison International and Great-west Goldman
The main advantage of trading using opposite Madison International and Great-west Goldman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Madison International position performs unexpectedly, Great-west Goldman 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 Great-west Goldman will offset losses from the drop in Great-west Goldman's long position.The idea behind Madison International Stock and Great West Goldman Sachs 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.
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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