Correlation Between Ritchie Bros and Madison Pacific

Can any of the company-specific risk be diversified away by investing in both Ritchie Bros and Madison Pacific 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 Ritchie Bros and Madison Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ritchie Bros Auctioneers and Madison Pacific Properties, you can compare the effects of market volatilities on Ritchie Bros and Madison Pacific 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 Ritchie Bros with a short position of Madison Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ritchie Bros and Madison Pacific.

Diversification Opportunities for Ritchie Bros and Madison Pacific

0.46

Correlation Coefficient

Ritchie Bros  Madison Pacific

Very weak diversification

The 3 months correlation between Ritchie and Madison is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ritchie Bros Auctioneers and Madison Pacific Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Pacific Prop and Ritchie Bros 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 Ritchie Bros Auctioneers are associated (or correlated) with Madison Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Pacific Prop has no effect on the direction of Ritchie Bros i.e., Ritchie Bros and Madison Pacific go up and down completely randomly.

Pair Corralation between Ritchie Bros and Madison Pacific

Assuming the 90 days trading horizon Ritchie Bros Auctioneers is expected to under-perform the Madison Pacific. But the stock apears to be less risky and, when comparing its historical volatility, Ritchie Bros Auctioneers is 3.64 times less risky than Madison Pacific. The stock trades about -0.28 of its potential returns per unit of risk. The Madison Pacific Properties is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  530.00  in Madison Pacific Properties on September 23, 2024 and sell it today you would earn a total of  1.00  from holding Madison Pacific Properties or generate 0.19% return on investment over 90 days.

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

Ritchie Bros Auctioneers  vs.  Madison Pacific Properties

Ritchie Bros Auctioneers

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ritchie Bros Auctioneers are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Ritchie Bros displayed solid returns over the last few months and may actually be approaching a breakup point.

Madison Pacific Prop

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Pacific Properties are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Madison Pacific displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ritchie Bros and Madison Pacific

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

The idea behind Ritchie Bros Auctioneers and Madison Pacific Properties 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.