Correlation Between Steven Madden and Union Electric

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

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

Diversification Opportunities for Steven Madden and Union Electric

0.17

Correlation Coefficient

Steven Madden  Union Electric

Average diversification

The 3 months correlation between Steven and Union is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Steven Madden and Union Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Electric 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 Union Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Electric has no effect on the direction of Steven Madden i.e., Steven Madden and Union Electric go up and down completely randomly.

Pair Corralation between Steven Madden and Union Electric

Given the investment horizon of 90 days Steven Madden is expected to generate 2.17 times less return on investment than Union Electric. But when comparing it to its historical volatility, Steven Madden is 2.72 times less risky than Union Electric. It trades about 0.05 of its potential returns per unit of risk. Union Electric is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,224  in Union Electric on September 14, 2024 and sell it today you would earn a total of  1,776  from holding Union Electric or generate 19.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	69.29%
Values	Daily Returns

Steven Madden  vs.  Union Electric

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 latest stock price disarray, may contribute to short-term losses for the investors.

Union Electric

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Union Electric are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, Union Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Steven Madden and Union Electric

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

The idea behind Steven Madden and Union Electric 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.