Correlation Between Genesis Land and Madison Pacific

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

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

Diversification Opportunities for Genesis Land and Madison Pacific

0.09

Correlation Coefficient

Genesis Land  Madison Pacific

Significant diversification

The 3 months correlation between Genesis and Madison is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Genesis Land Development 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 Genesis Land 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 Genesis Land Development 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 Genesis Land i.e., Genesis Land and Madison Pacific go up and down completely randomly.

Pair Corralation between Genesis Land and Madison Pacific

Assuming the 90 days trading horizon Genesis Land Development is expected to under-perform the Madison Pacific. In addition to that, Genesis Land is 1.01 times more volatile than Madison Pacific Properties. It trades about -0.04 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  400.00  in Madison Pacific Properties on September 12, 2024 and sell it today you would earn a total of  40.00  from holding Madison Pacific Properties or generate 10.0% return on investment over 90 days.

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

Genesis Land Development  vs.  Madison Pacific Properties

Genesis Land Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genesis Land Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Madison Pacific Prop

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Pacific Properties are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Madison Pacific may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Genesis Land and Madison Pacific

The main advantage of trading using opposite Genesis Land and Madison Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genesis Land 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 Genesis Land Development 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.