Correlation Between Madison Mid and Amg Southernsun

Can any of the company-specific risk be diversified away by investing in both Madison Mid and Amg Southernsun 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 Amg Southernsun 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 Amg Southernsun Small, you can compare the effects of market volatilities on Madison Mid and Amg Southernsun 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 Amg Southernsun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madison Mid and Amg Southernsun.

Diversification Opportunities for Madison Mid and Amg Southernsun

0.87

Correlation Coefficient

Madison Mid  Amg Southernsun

Very poor diversification

The 3 months correlation between Madison and Amg is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Madison Mid Cap and Amg Southernsun Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amg Southernsun Small 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 Amg Southernsun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amg Southernsun Small has no effect on the direction of Madison Mid i.e., Madison Mid and Amg Southernsun go up and down completely randomly.

Pair Corralation between Madison Mid and Amg Southernsun

Assuming the 90 days horizon Madison Mid Cap is expected to generate 1.0 times more return on investment than Amg Southernsun. However, Madison Mid Cap is 1.0 times less risky than Amg Southernsun. It trades about -0.14 of its potential returns per unit of risk. Amg Southernsun Small is currently generating about -0.16 per unit of risk. If you would invest  1,728  in Madison Mid Cap on December 20, 2024 and sell it today you would lose (168.00) from holding Madison Mid Cap or give up 9.72% of portfolio value over 90 days.

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

Madison Mid Cap  vs.  Amg Southernsun Small

Madison Mid Cap

Risk-Adjusted Performance

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 latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Amg Southernsun Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amg Southernsun Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental 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 Amg Southernsun

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

The idea behind Madison Mid Cap and Amg Southernsun Small 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.