Correlation Between Madison Square and Adtalem Global

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

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

Diversification Opportunities for Madison Square and Adtalem Global

-0.75

Correlation Coefficient

Madison Square  Adtalem Global

Pay attention - limited upside

The 3 months correlation between Madison and Adtalem is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Madison Square Garden and Adtalem Global Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adtalem Global Education and Madison Square 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 Square Garden are associated (or correlated) with Adtalem Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adtalem Global Education has no effect on the direction of Madison Square i.e., Madison Square and Adtalem Global go up and down completely randomly.

Pair Corralation between Madison Square and Adtalem Global

Given the investment horizon of 90 days Madison Square Garden is expected to under-perform the Adtalem Global. But the stock apears to be less risky and, when comparing its historical volatility, Madison Square Garden is 1.09 times less risky than Adtalem Global. The stock trades about -0.1 of its potential returns per unit of risk. The Adtalem Global Education is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  7,286  in Adtalem Global Education on September 13, 2024 and sell it today you would earn a total of  1,594  from holding Adtalem Global Education or generate 21.88% return on investment over 90 days.

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

Madison Square Garden  vs.  Adtalem Global Education

Madison Square Garden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Madison Square Garden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Adtalem Global Education

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adtalem Global Education are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Adtalem Global exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Madison Square and Adtalem Global

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

The idea behind Madison Square Garden and Adtalem Global Education 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.