Correlation Between Madison International and Needham Small
Can any of the company-specific risk be diversified away by investing in both Madison International and Needham 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 International and Needham Small 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 Needham Small Cap, you can compare the effects of market volatilities on Madison International and Needham 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 International with a short position of Needham Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madison International and Needham Small.
Diversification Opportunities for Madison International and Needham Small
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Madison and Needham is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Madison International Stock and Needham Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Needham Small Cap 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 Needham Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Needham Small Cap has no effect on the direction of Madison International i.e., Madison International and Needham Small go up and down completely randomly.
Pair Corralation between Madison International and Needham Small
Assuming the 90 days horizon Madison International is expected to generate 2.51 times less return on investment than Needham Small. But when comparing it to its historical volatility, Madison International Stock is 1.72 times less risky than Needham Small. It trades about 0.15 of its potential returns per unit of risk. Needham Small Cap is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,878 in Needham Small Cap on October 25, 2024 and sell it today you would earn a total of 98.00 from holding Needham Small Cap or generate 5.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Madison International Stock vs. Needham Small Cap
Performance |
| Timeline |
| Madison International |
| Needham Small Cap |
Madison International and Needham Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Madison International and Needham Small
The main advantage of trading using opposite Madison International and Needham Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Madison International position performs unexpectedly, Needham 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 Needham Small will offset losses from the drop in Needham Small's long position.| Madison International vs. Rbb Fund | Madison International vs. Small Pany Growth | Madison International vs. Arrow Managed Futures | Madison International vs. Astoncrosswind Small Cap |
| Needham Small vs. Needham Aggressive Growth | Needham Small vs. Needham Growth Fund | Needham Small vs. Baron Opportunity Fund | Needham Small vs. Jacob Micro Cap |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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