Correlation Between Morguard and Madison Pacific

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

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

Diversification Opportunities for Morguard and Madison Pacific

0.74

Correlation Coefficient

Morguard  Madison Pacific

Poor diversification

The 3 months correlation between Morguard and Madison is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Morguard and Madison Pacific Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Pacific Prop and Morguard 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 Morguard are associated (or correlated) with Madison Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Pacific Prop has no effect on the direction of Morguard i.e., Morguard and Madison Pacific go up and down completely randomly.

Pair Corralation between Morguard and Madison Pacific

Assuming the 90 days trading horizon Morguard is expected to generate 0.56 times more return on investment than Madison Pacific. However, Morguard is 1.8 times less risky than Madison Pacific. It trades about -0.04 of its potential returns per unit of risk. Madison Pacific Properties is currently generating about -0.05 per unit of risk. If you would invest  11,912  in Morguard on December 1, 2024 and sell it today you would lose (413.00) from holding Morguard or give up 3.47% of portfolio value over 90 days.

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

Morguard  vs.  Madison Pacific Properties

Morguard

Risk-Adjusted Performance

Very Weak

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

Madison Pacific Prop

Risk-Adjusted Performance

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 latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Morguard and Madison Pacific

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

The idea behind Morguard and Madison Pacific Properties 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.