Correlation Between Madison Square and Advantage Solutions

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

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

Diversification Opportunities for Madison Square and Advantage Solutions

0.93

Correlation Coefficient

Madison Square  Advantage Solutions

Almost no diversification

The 3 months correlation between Madison and Advantage is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Madison Square Garden and Advantage Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Solutions and Madison Square 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 Madison Square Garden are associated (or correlated) with Advantage Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantage Solutions has no effect on the direction of Madison Square i.e., Madison Square and Advantage Solutions go up and down completely randomly.

Pair Corralation between Madison Square and Advantage Solutions

Given the investment horizon of 90 days Madison Square Garden is expected to generate 0.44 times more return on investment than Advantage Solutions. However, Madison Square Garden is 2.26 times less risky than Advantage Solutions. It trades about -0.17 of its potential returns per unit of risk. Advantage Solutions is currently generating about -0.27 per unit of risk. If you would invest  3,846  in Madison Square Garden on March 22, 2024 and sell it today you would lose (493.00) from holding Madison Square Garden or give up 12.82% of portfolio value over 90 days.

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

Madison Square Garden  vs.  Advantage Solutions

Madison Square Garden

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Advantage Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advantage Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in July 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Madison Square and Advantage Solutions

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

The idea behind Madison Square Garden and Advantage Solutions 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.