Correlation Between Matrix Advisors and Madison Investors

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

By analyzing existing cross correlation between Matrix Advisors Value and Madison Investors Fund, you can compare the effects of market volatilities on Matrix Advisors and Madison Investors 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 Matrix Advisors with a short position of Madison Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matrix Advisors and Madison Investors.

Diversification Opportunities for Matrix Advisors and Madison Investors

0.66

Correlation Coefficient

Matrix Advisors  Madison Investors

Poor diversification

The 3 months correlation between Matrix and Madison is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Matrix Advisors Value and Madison Investors Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Investors and Matrix Advisors 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 Matrix Advisors Value are associated (or correlated) with Madison Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Investors has no effect on the direction of Matrix Advisors i.e., Matrix Advisors and Madison Investors go up and down completely randomly.

Pair Corralation between Matrix Advisors and Madison Investors

Assuming the 90 days horizon Matrix Advisors Value is expected to generate 0.87 times more return on investment than Madison Investors. However, Matrix Advisors Value is 1.15 times less risky than Madison Investors. It trades about -0.09 of its potential returns per unit of risk. Madison Investors Fund is currently generating about -0.13 per unit of risk. If you would invest  10,792  in Matrix Advisors Value on December 4, 2024 and sell it today you would lose (528.00) from holding Matrix Advisors Value or give up 4.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.0%
Values	Daily Returns

Matrix Advisors Value  vs.  Madison Investors Fund

Matrix Advisors Value

Risk-Adjusted Performance

Very Weak

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

Madison Investors

Risk-Adjusted Performance

Very Weak

Over the last 90 days Madison Investors Fund 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 Matrix Advisors and Madison Investors

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

The idea behind Matrix Advisors Value and Madison Investors Fund 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.