Correlation Between Madison Pacific and Mainstreet Equity

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

By analyzing existing cross correlation between Madison Pacific Properties and Mainstreet Equity Corp, you can compare the effects of market volatilities on Madison Pacific and Mainstreet Equity 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 Pacific with a short position of Mainstreet Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madison Pacific and Mainstreet Equity.

Diversification Opportunities for Madison Pacific and Mainstreet Equity

-0.23

Correlation Coefficient

Madison Pacific  Mainstreet Equity

Very good diversification

The 3 months correlation between Madison and Mainstreet is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Madison Pacific Properties and Mainstreet Equity Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstreet Equity Corp and Madison Pacific 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 Pacific Properties are associated (or correlated) with Mainstreet Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstreet Equity Corp has no effect on the direction of Madison Pacific i.e., Madison Pacific and Mainstreet Equity go up and down completely randomly.

Pair Corralation between Madison Pacific and Mainstreet Equity

Assuming the 90 days trading horizon Madison Pacific Properties is expected to generate 2.18 times more return on investment than Mainstreet Equity. However, Madison Pacific is 2.18 times more volatile than Mainstreet Equity Corp. It trades about 0.07 of its potential returns per unit of risk. Mainstreet Equity Corp is currently generating about 0.06 per unit of risk. If you would invest  400.00  in Madison Pacific Properties on September 12, 2024 and sell it today you would earn a total of  40.00  from holding Madison Pacific Properties or generate 10.0% return on investment over 90 days.

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

Madison Pacific Properties  vs.  Mainstreet Equity Corp

Madison Pacific Prop

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Pacific Properties are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Madison Pacific may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mainstreet Equity Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mainstreet Equity Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Mainstreet Equity is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Madison Pacific and Mainstreet Equity

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

The idea behind Madison Pacific Properties and Mainstreet Equity Corp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.