Correlation Between Stantec and Madison Pacific

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

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

Diversification Opportunities for Stantec and Madison Pacific

0.68

Correlation Coefficient

Stantec  Madison Pacific

Poor diversification

The 3 months correlation between Stantec and Madison is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Stantec 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 Stantec 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 Stantec 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 Stantec i.e., Stantec and Madison Pacific go up and down completely randomly.

Pair Corralation between Stantec and Madison Pacific

Assuming the 90 days trading horizon Stantec is expected to under-perform the Madison Pacific. But the stock apears to be less risky and, when comparing its historical volatility, Stantec is 3.53 times less risky than Madison Pacific. The stock trades about -0.35 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 26, 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	Significant
Accuracy	100.0%
Values	Daily Returns

Stantec  vs.  Madison Pacific Properties

Stantec

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stantec are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Stantec is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Madison Pacific Prop

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Pacific Properties are ranked lower than 7 (%) 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 Stantec and Madison Pacific

The main advantage of trading using opposite Stantec and Madison Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stantec 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 Stantec 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.