Correlation Between Madison Investors and Madison Dividend

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

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

Diversification Opportunities for Madison Investors and Madison Dividend

0.93

Correlation Coefficient

Madison Investors  Madison Dividend

Almost no diversification

The 3 months correlation between Madison and Madison is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Madison Investors Fund and Madison Dividend Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Dividend Income and Madison Investors 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 Investors Fund are associated (or correlated) with Madison Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Dividend Income has no effect on the direction of Madison Investors i.e., Madison Investors and Madison Dividend go up and down completely randomly.

Pair Corralation between Madison Investors and Madison Dividend

Assuming the 90 days horizon Madison Investors Fund is expected to generate 1.31 times more return on investment than Madison Dividend. However, Madison Investors is 1.31 times more volatile than Madison Dividend Income. It trades about 0.17 of its potential returns per unit of risk. Madison Dividend Income is currently generating about 0.17 per unit of risk. If you would invest  2,962  in Madison Investors Fund on September 11, 2024 and sell it today you would earn a total of  247.00  from holding Madison Investors Fund or generate 8.34% return on investment over 90 days.

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

Madison Investors Fund  vs.  Madison Dividend Income

Madison Investors

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Investors Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Madison Investors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Madison Dividend Income

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Dividend Income are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Madison Dividend 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 Investors and Madison Dividend

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

The idea behind Madison Investors Fund and Madison Dividend Income 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.