Correlation Between Steven Madden and SGS SA

Can any of the company-specific risk be diversified away by investing in both Steven Madden and SGS SA 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 Steven Madden and SGS SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Steven Madden and SGS SA, you can compare the effects of market volatilities on Steven Madden and SGS SA 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 Steven Madden with a short position of SGS SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steven Madden and SGS SA.

Diversification Opportunities for Steven Madden and SGS SA

0.57

Correlation Coefficient

Steven Madden  SGS SA

Very weak diversification

The 3 months correlation between Steven and SGS is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Steven Madden and SGS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGS SA and Steven Madden 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 Steven Madden are associated (or correlated) with SGS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGS SA has no effect on the direction of Steven Madden i.e., Steven Madden and SGS SA go up and down completely randomly.

Pair Corralation between Steven Madden and SGS SA

Given the investment horizon of 90 days Steven Madden is expected to generate 0.64 times more return on investment than SGS SA. However, Steven Madden is 1.57 times less risky than SGS SA. It trades about -0.03 of its potential returns per unit of risk. SGS SA is currently generating about -0.07 per unit of risk. If you would invest  4,561  in Steven Madden on September 13, 2024 and sell it today you would lose (186.00) from holding Steven Madden or give up 4.08% of portfolio value over 90 days.

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

Steven Madden  vs.  SGS SA

Steven Madden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steven Madden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Steven Madden is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

SGS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Steven Madden and SGS SA

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

The idea behind Steven Madden and SGS SA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.