Correlation Between ADF and Madison Pacific

Can any of the company-specific risk be diversified away by investing in both ADF and Madison Pacific 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 ADF and Madison Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ADF Group and Madison Pacific Properties, you can compare the effects of market volatilities on ADF and Madison Pacific 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 ADF with a short position of Madison Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADF and Madison Pacific.

Diversification Opportunities for ADF and Madison Pacific

-0.4

Correlation Coefficient

ADF  Madison Pacific

Very good diversification

The 3 months correlation between ADF and Madison is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding ADF Group and Madison Pacific Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Pacific Prop and ADF 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 ADF Group are associated (or correlated) with Madison Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Pacific Prop has no effect on the direction of ADF i.e., ADF and Madison Pacific go up and down completely randomly.

Pair Corralation between ADF and Madison Pacific

Assuming the 90 days trading horizon ADF is expected to generate 1.19 times less return on investment than Madison Pacific. In addition to that, ADF is 1.24 times more volatile than Madison Pacific Properties. It trades about 0.05 of its total potential returns per unit of risk. Madison Pacific Properties is currently generating about 0.07 per unit of volatility. If you would invest  321.00  in Madison Pacific Properties on October 6, 2024 and sell it today you would earn a total of  179.00  from holding Madison Pacific Properties or generate 55.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ADF Group  vs.  Madison Pacific Properties

ADF Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADF Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ADF is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Madison Pacific Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Madison Pacific Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Madison Pacific is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ADF and Madison Pacific

The main advantage of trading using opposite ADF and Madison Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADF position performs unexpectedly, Madison Pacific 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 Pacific will offset losses from the drop in Madison Pacific's long position.

The idea behind ADF Group and Madison Pacific Properties 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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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.