Correlation Between YETI Holdings and Madison Square

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

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

Diversification Opportunities for YETI Holdings and Madison Square

-0.09

Correlation Coefficient

YETI Holdings  Madison Square

Good diversification

The 3 months correlation between YETI and Madison is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding YETI Holdings and Madison Square Garden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Square Garden and YETI Holdings 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 YETI Holdings are associated (or correlated) with Madison Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Square Garden has no effect on the direction of YETI Holdings i.e., YETI Holdings and Madison Square go up and down completely randomly.

Pair Corralation between YETI Holdings and Madison Square

Given the investment horizon of 90 days YETI Holdings is expected to under-perform the Madison Square. But the stock apears to be less risky and, when comparing its historical volatility, YETI Holdings is 1.07 times less risky than Madison Square. The stock trades about -0.06 of its potential returns per unit of risk. The Madison Square Garden is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  3,699  in Madison Square Garden on November 28, 2024 and sell it today you would lose (218.00) from holding Madison Square Garden or give up 5.89% of portfolio value over 90 days.

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

YETI Holdings  vs.  Madison Square Garden

YETI Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days YETI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Madison Square Garden

Risk-Adjusted Performance

Very Weak

Over the last 90 days Madison Square Garden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Madison Square is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with YETI Holdings and Madison Square

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

The idea behind YETI Holdings and Madison Square Garden 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.