Correlation Between Madison Pacific and ADF

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

Diversification Opportunities for Madison Pacific and ADF

-0.4

Correlation Coefficient

Madison Pacific  ADF

Very good diversification

The 3 months correlation between Madison and ADF is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Madison Pacific Properties and ADF Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADF Group 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 ADF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADF Group has no effect on the direction of Madison Pacific i.e., Madison Pacific and ADF go up and down completely randomly.

Pair Corralation between Madison Pacific and ADF

Assuming the 90 days trading horizon Madison Pacific is expected to generate 1.26 times less return on investment than ADF. But when comparing it to its historical volatility, Madison Pacific Properties is 1.27 times less risky than ADF. It trades about 0.07 of its potential returns per unit of risk. ADF Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  501.00  in ADF Group on October 6, 2024 and sell it today you would earn a total of  469.00  from holding ADF Group or generate 93.61% return on investment over 90 days.

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

Madison Pacific Properties  vs.  ADF Group

Madison Pacific Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Madison Pacific Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Madison Pacific is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

ADF Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADF Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ADF 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 ADF

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

The idea behind Madison Pacific Properties and ADF Group 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.