Correlation Between Monolithic Power and Madison Mid

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

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

Diversification Opportunities for Monolithic Power and Madison Mid

0.09

Correlation Coefficient

Monolithic Power  Madison Mid

Significant diversification

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

Pair Corralation between Monolithic Power and Madison Mid

Given the investment horizon of 90 days Monolithic Power Systems is expected to generate 3.22 times more return on investment than Madison Mid. However, Monolithic Power is 3.22 times more volatile than Madison Mid Cap. It trades about 0.08 of its potential returns per unit of risk. Madison Mid Cap is currently generating about 0.0 per unit of risk. If you would invest  82,220  in Monolithic Power Systems on September 2, 2025 and sell it today you would earn a total of  10,615  from holding Monolithic Power Systems or generate 12.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Monolithic Power Systems  vs.  Madison Mid Cap

Monolithic Power Systems

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Monolithic Power Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Monolithic Power reported solid returns over the last few months and may actually be approaching a breakup point.

Madison Mid Cap

Risk-Adjusted Performance

Weakest

Over the last 90 days Madison Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Madison Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Monolithic Power and Madison Mid

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

The idea behind Monolithic Power Systems and Madison Mid Cap 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.