Correlation Between Madison Square and American Picture

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

Diversification Opportunities for Madison Square and American Picture

0.48

Correlation Coefficient

Madison Square  American Picture

Very weak diversification

The 3 months correlation between Madison and American is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Madison Square Garden and American Picture House in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Picture House 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 American Picture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Picture House has no effect on the direction of Madison Square i.e., Madison Square and American Picture go up and down completely randomly.

Pair Corralation between Madison Square and American Picture

Given the investment horizon of 90 days Madison Square Garden is expected to generate 0.2 times more return on investment than American Picture. However, Madison Square Garden is 4.91 times less risky than American Picture. It trades about 0.18 of its potential returns per unit of risk. American Picture House is currently generating about 0.02 per unit of risk. If you would invest  20,577  in Madison Square Garden on September 4, 2024 and sell it today you would earn a total of  2,331  from holding Madison Square Garden or generate 11.33% return on investment over 90 days.

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

Madison Square Garden  vs.  American Picture House

Madison Square Garden

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Square Garden are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, Madison Square may actually be approaching a critical reversion point that can send shares even higher in January 2025.

American Picture House

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Picture House are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, American Picture may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Madison Square and American Picture

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

The idea behind Madison Square Garden and American Picture House 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.