Correlation Between Graham Holdings and Madison Square

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

By analyzing existing cross correlation between Graham Holdings Co and Madison Square Garden, you can compare the effects of market volatilities on Graham Holdings and Madison Square 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 Graham Holdings with a short position of Madison Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of Graham Holdings and Madison Square.

Diversification Opportunities for Graham Holdings and Madison Square

-0.6

Correlation Coefficient

Graham Holdings  Madison Square

Excellent diversification

The 3 months correlation between Graham and Madison is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Graham Holdings Co and Madison Square Garden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Square Garden and Graham Holdings 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 Graham Holdings Co are associated (or correlated) with Madison Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Square Garden has no effect on the direction of Graham Holdings i.e., Graham Holdings and Madison Square go up and down completely randomly.

Pair Corralation between Graham Holdings and Madison Square

Considering the 90-day investment horizon Graham Holdings Co is expected to generate 1.23 times more return on investment than Madison Square. However, Graham Holdings is 1.23 times more volatile than Madison Square Garden. It trades about 0.13 of its potential returns per unit of risk. Madison Square Garden is currently generating about -0.11 per unit of risk. If you would invest  79,351  in Graham Holdings Co on August 30, 2024 and sell it today you would earn a total of  14,307  from holding Graham Holdings Co or generate 18.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Graham Holdings Co  vs.  Madison Square Garden

Graham Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Graham Holdings Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Graham Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Madison Square Garden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Madison Square Garden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Graham Holdings and Madison Square

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

The idea behind Graham Holdings Co and Madison Square Garden 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.