Correlation Between Madison Mid and Carillon Scout

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

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

Diversification Opportunities for Madison Mid and Carillon Scout

0.9

Correlation Coefficient

Madison Mid  Carillon Scout

Almost no diversification

The 3 months correlation between Madison and Carillon is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Madison Mid Cap and Carillon Scout Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carillon Scout Mid and Madison Mid 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 Mid Cap are associated (or correlated) with Carillon Scout. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carillon Scout Mid has no effect on the direction of Madison Mid i.e., Madison Mid and Carillon Scout go up and down completely randomly.

Pair Corralation between Madison Mid and Carillon Scout

Assuming the 90 days horizon Madison Mid Cap is expected to generate 0.49 times more return on investment than Carillon Scout. However, Madison Mid Cap is 2.04 times less risky than Carillon Scout. It trades about -0.3 of its potential returns per unit of risk. Carillon Scout Mid is currently generating about -0.26 per unit of risk. If you would invest  1,823  in Madison Mid Cap on October 9, 2024 and sell it today you would lose (173.00) from holding Madison Mid Cap or give up 9.49% of portfolio value over 90 days.

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

Madison Mid Cap  vs.  Carillon Scout Mid

Madison Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Madison Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Madison Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Carillon Scout Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carillon Scout Mid has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Madison Mid and Carillon Scout

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

The idea behind Madison Mid Cap and Carillon Scout Mid 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.