Correlation Between Madison Square and Oriental Land

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

Diversification Opportunities for Madison Square and Oriental Land

0.36

Correlation Coefficient

Madison Square  Oriental Land

Weak diversification

The 3 months correlation between Madison and Oriental is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Madison Square Garden and Oriental Land Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Land 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 Oriental Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Land has no effect on the direction of Madison Square i.e., Madison Square and Oriental Land go up and down completely randomly.

Pair Corralation between Madison Square and Oriental Land

Given the investment horizon of 90 days Madison Square Garden is expected to under-perform the Oriental Land. But the stock apears to be less risky and, when comparing its historical volatility, Madison Square Garden is 1.06 times less risky than Oriental Land. The stock trades about -0.12 of its potential returns per unit of risk. The Oriental Land Co is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  2,295  in Oriental Land Co on December 4, 2024 and sell it today you would lose (255.00) from holding Oriental Land Co or give up 11.11% of portfolio value over 90 days.

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

Madison Square Garden  vs.  Oriental Land Co

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Oriental Land

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oriental Land Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Madison Square and Oriental Land

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

The idea behind Madison Square Garden and Oriental Land Co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.