Correlation Between Madison Diversified and Bny Mellon

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

By analyzing existing cross correlation between Madison Diversified Income and Bny Mellon Intermediate, you can compare the effects of market volatilities on Madison Diversified and Bny Mellon 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 Diversified with a short position of Bny Mellon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madison Diversified and Bny Mellon.

Diversification Opportunities for Madison Diversified and Bny Mellon

0.53

Correlation Coefficient

Madison Diversified  Bny Mellon

Very weak diversification

The 3 months correlation between Madison and Bny is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Madison Diversified Income and Bny Mellon Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bny Mellon Intermediate and Madison Diversified 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 Diversified Income are associated (or correlated) with Bny Mellon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bny Mellon Intermediate has no effect on the direction of Madison Diversified i.e., Madison Diversified and Bny Mellon go up and down completely randomly.

Pair Corralation between Madison Diversified and Bny Mellon

Assuming the 90 days horizon Madison Diversified Income is expected to generate 2.01 times more return on investment than Bny Mellon. However, Madison Diversified is 2.01 times more volatile than Bny Mellon Intermediate. It trades about 0.03 of its potential returns per unit of risk. Bny Mellon Intermediate is currently generating about 0.05 per unit of risk. If you would invest  1,193  in Madison Diversified Income on October 9, 2024 and sell it today you would earn a total of  80.00  from holding Madison Diversified Income or generate 6.71% return on investment over 90 days.

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

Madison Diversified Income  vs.  Bny Mellon Intermediate

Madison Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

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

Bny Mellon Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Madison Diversified and Bny Mellon

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

The idea behind Madison Diversified Income and Bny Mellon Intermediate 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.