Correlation Between Madison Square and Plastic Omnium
Can any of the company-specific risk be diversified away by investing in both Madison Square and Plastic Omnium 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 Square and Plastic Omnium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Madison Square Garden and Plastic Omnium, you can compare the effects of market volatilities on Madison Square and Plastic Omnium 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 Square with a short position of Plastic Omnium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madison Square and Plastic Omnium.
Diversification Opportunities for Madison Square and Plastic Omnium
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Madison and Plastic is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Madison Square Garden and Plastic Omnium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plastic Omnium and Madison Square 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 Square Garden are associated (or correlated) with Plastic Omnium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plastic Omnium has no effect on the direction of Madison Square i.e., Madison Square and Plastic Omnium go up and down completely randomly.
Pair Corralation between Madison Square and Plastic Omnium
Assuming the 90 days horizon Madison Square Garden is expected to generate 0.59 times more return on investment than Plastic Omnium. However, Madison Square Garden is 1.7 times less risky than Plastic Omnium. It trades about 0.05 of its potential returns per unit of risk. Plastic Omnium is currently generating about -0.05 per unit of risk. If you would invest 16,800 in Madison Square Garden on September 12, 2024 and sell it today you would earn a total of 4,600 from holding Madison Square Garden or generate 27.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Madison Square Garden vs. Plastic Omnium
Performance |
| Timeline |
| Madison Square Garden |
| Plastic Omnium |
Madison Square and Plastic Omnium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Madison Square and Plastic Omnium
The main advantage of trading using opposite Madison Square and Plastic Omnium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Madison Square position performs unexpectedly, Plastic Omnium 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 Plastic Omnium will offset losses from the drop in Plastic Omnium's long position.| Madison Square vs. Lifeway Foods | Madison Square vs. PREMIER FOODS | Madison Square vs. NISSIN FOODS HLDGS | Madison Square vs. URBAN OUTFITTERS |
| Plastic Omnium vs. Apple Inc | Plastic Omnium vs. Apple Inc | Plastic Omnium vs. Apple Inc | Plastic Omnium vs. Apple Inc |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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