Correlation Between Madison Square and Life Time

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

Diversification Opportunities for Madison Square and Life Time

0.18

Correlation Coefficient

Madison Square  Life Time

Average diversification

The 3 months correlation between Madison and Life is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Madison Square Garden and Life Time Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Time Group 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 Life Time. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Time Group has no effect on the direction of Madison Square i.e., Madison Square and Life Time go up and down completely randomly.

Pair Corralation between Madison Square and Life Time

Given the investment horizon of 90 days Madison Square Garden is expected to under-perform the Life Time. But the stock apears to be less risky and, when comparing its historical volatility, Madison Square Garden is 1.32 times less risky than Life Time. The stock trades about -0.05 of its potential returns per unit of risk. The Life Time Group is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2,188  in Life Time Group on December 29, 2024 and sell it today you would earn a total of  862.00  from holding Life Time Group or generate 39.4% return on investment over 90 days.

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

Madison Square Garden  vs.  Life Time Group

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.

Life Time Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Life Time Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, Life Time demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Madison Square and Life Time

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

The idea behind Madison Square Garden and Life Time 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.