Correlation Between Madison Pacific and FP Newspapers

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

Diversification Opportunities for Madison Pacific and FP Newspapers

0.06

Correlation Coefficient

Madison Pacific  FP Newspapers

Significant diversification

The 3 months correlation between Madison and FP Newspapers is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Madison Pacific Properties and FP Newspapers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FP Newspapers 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 FP Newspapers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FP Newspapers has no effect on the direction of Madison Pacific i.e., Madison Pacific and FP Newspapers go up and down completely randomly.

Pair Corralation between Madison Pacific and FP Newspapers

Assuming the 90 days trading horizon Madison Pacific Properties is expected to under-perform the FP Newspapers. But the stock apears to be less risky and, when comparing its historical volatility, Madison Pacific Properties is 1.79 times less risky than FP Newspapers. The stock trades about -0.15 of its potential returns per unit of risk. The FP Newspapers is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  48.00  in FP Newspapers on October 24, 2024 and sell it today you would earn a total of  0.00  from holding FP Newspapers or generate 0.0% return on investment over 90 days.

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

Madison Pacific Properties  vs.  FP Newspapers

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.

FP Newspapers

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FP Newspapers are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, FP Newspapers is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Madison Pacific and FP Newspapers

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

The idea behind Madison Pacific Properties and FP Newspapers 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.