Correlation Between Madison Square and Johnson Outdoors

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

Diversification Opportunities for Madison Square and Johnson Outdoors

0.57

Correlation Coefficient

Madison Square  Johnson Outdoors

Very weak diversification

The 3 months correlation between Madison and Johnson is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Madison Square Garden and Johnson Outdoors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Outdoors 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 Johnson Outdoors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Outdoors has no effect on the direction of Madison Square i.e., Madison Square and Johnson Outdoors go up and down completely randomly.

Pair Corralation between Madison Square and Johnson Outdoors

Given the investment horizon of 90 days Madison Square Garden is expected to generate 0.79 times more return on investment than Johnson Outdoors. However, Madison Square Garden is 1.27 times less risky than Johnson Outdoors. It trades about -0.05 of its potential returns per unit of risk. Johnson Outdoors is currently generating about -0.18 per unit of risk. If you would invest  3,583  in Madison Square Garden on December 29, 2024 and sell it today you would lose (212.00) from holding Madison Square Garden or give up 5.92% of portfolio value over 90 days.

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

Madison Square Garden  vs.  Johnson Outdoors

Madison Square Garden

Risk-Adjusted Performance

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 rather sound technical and fundamental indicators, Madison Square is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Johnson Outdoors

Risk-Adjusted Performance

Very Weak

Over the last 90 days Johnson Outdoors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Madison Square and Johnson Outdoors

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

The idea behind Madison Square Garden and Johnson Outdoors 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.