Correlation Between Madison Square and Leatt Corp

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

Diversification Opportunities for Madison Square and Leatt Corp

0.24

Correlation Coefficient

Madison Square  Leatt Corp

Modest diversification

The 3 months correlation between Madison and Leatt is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Madison Square Garden and Leatt Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leatt Corp 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 Leatt Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leatt Corp has no effect on the direction of Madison Square i.e., Madison Square and Leatt Corp go up and down completely randomly.

Pair Corralation between Madison Square and Leatt Corp

Given the investment horizon of 90 days Madison Square Garden is expected to generate 1.76 times more return on investment than Leatt Corp. However, Madison Square is 1.76 times more volatile than Leatt Corp. It trades about 0.03 of its potential returns per unit of risk. Leatt Corp is currently generating about -0.06 per unit of risk. If you would invest  3,345  in Madison Square Garden on December 26, 2024 and sell it today you would earn a total of  65.00  from holding Madison Square Garden or generate 1.94% return on investment over 90 days.

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

Madison Square Garden  vs.  Leatt Corp

Madison Square Garden

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Square Garden are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Leatt Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Leatt Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Leatt Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Madison Square and Leatt Corp

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

The idea behind Madison Square Garden and Leatt Corp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.