Correlation Between Madison Square and Shimano
Can any of the company-specific risk be diversified away by investing in both Madison Square and Shimano 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 Shimano 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 Shimano Inc ADR, you can compare the effects of market volatilities on Madison Square and Shimano 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 Shimano. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madison Square and Shimano.
Diversification Opportunities for Madison Square and Shimano
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Madison and Shimano is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Madison Square Garden and Shimano Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shimano Inc ADR 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 Shimano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shimano Inc ADR has no effect on the direction of Madison Square i.e., Madison Square and Shimano go up and down completely randomly.
Pair Corralation between Madison Square and Shimano
Given the investment horizon of 90 days Madison Square Garden is expected to generate 1.14 times more return on investment than Shimano. However, Madison Square is 1.14 times more volatile than Shimano Inc ADR. It trades about 0.01 of its potential returns per unit of risk. Shimano Inc ADR is currently generating about -0.02 per unit of risk. If you would invest 3,673 in Madison Square Garden on August 31, 2024 and sell it today you would earn a total of 26.00 from holding Madison Square Garden or generate 0.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Madison Square Garden vs. Shimano Inc ADR
Performance |
| Timeline |
| Madison Square Garden |
| Shimano Inc ADR |
Madison Square and Shimano Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Madison Square and Shimano
The main advantage of trading using opposite Madison Square and Shimano positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Madison Square position performs unexpectedly, Shimano 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 Shimano will offset losses from the drop in Shimano's long position.| Madison Square vs. Madison Square Garden | Madison Square vs. Graham Holdings Co | Madison Square vs. Atlanta Braves Holdings, | Madison Square vs. Live Nation Entertainment |
| Shimano vs. Callaway Golf | Shimano vs. Peloton Interactive | Shimano vs. BANDAI NAMCO Holdings | Shimano vs. Nikon Corp |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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