Correlation Between Diamond Estates and Madison Pacific

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

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

Diversification Opportunities for Diamond Estates and Madison Pacific

0.67

Correlation Coefficient

Diamond Estates  Madison Pacific

Poor diversification

The 3 months correlation between Diamond and Madison is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Estates Wines 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 Diamond Estates 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 Diamond Estates Wines 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 Diamond Estates i.e., Diamond Estates and Madison Pacific go up and down completely randomly.

Pair Corralation between Diamond Estates and Madison Pacific

Assuming the 90 days horizon Diamond Estates Wines is expected to under-perform the Madison Pacific. In addition to that, Diamond Estates is 1.85 times more volatile than Madison Pacific Properties. It trades about -0.07 of its total potential returns per unit of risk. Madison Pacific Properties is currently generating about 0.03 per unit of volatility. If you would invest  425.00  in Madison Pacific Properties on September 14, 2024 and sell it today you would earn a total of  15.00  from holding Madison Pacific Properties or generate 3.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Diamond Estates Wines  vs.  Madison Pacific Properties

Diamond Estates Wines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Estates Wines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Madison Pacific Prop

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Pacific Properties are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Madison Pacific is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Diamond Estates and Madison Pacific

The main advantage of trading using opposite Diamond Estates and Madison Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Estates 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 Diamond Estates Wines 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.