Correlation Between Madison Pacific and Network Media

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

Diversification Opportunities for Madison Pacific and Network Media

-0.21

Correlation Coefficient

Madison Pacific  Network Media

Very good diversification

The 3 months correlation between Madison and Network is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Madison Pacific Properties and Network Media Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Network Media 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 Network Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Network Media Group has no effect on the direction of Madison Pacific i.e., Madison Pacific and Network Media go up and down completely randomly.

Pair Corralation between Madison Pacific and Network Media

Assuming the 90 days trading horizon Madison Pacific Properties is expected to under-perform the Network Media. But the stock apears to be less risky and, when comparing its historical volatility, Madison Pacific Properties is 2.23 times less risky than Network Media. The stock trades about -0.13 of its potential returns per unit of risk. The Network Media Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  8.00  in Network Media Group on October 9, 2024 and sell it today you would lose (0.25) from holding Network Media Group or give up 3.12% of portfolio value over 90 days.

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

Madison Pacific Properties  vs.  Network Media 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.

Network Media Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Network Media Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Madison Pacific and Network Media

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

The idea behind Madison Pacific Properties and Network Media 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.