Correlation Between Madison Small and Invesco Global

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

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

Diversification Opportunities for Madison Small and Invesco Global

0.63

Correlation Coefficient

Madison Small  Invesco Global

Poor diversification

The 3 months correlation between Madison and Invesco is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Madison Small Cap and Invesco Global Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Global Real and Madison Small 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 Small Cap are associated (or correlated) with Invesco Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Global Real has no effect on the direction of Madison Small i.e., Madison Small and Invesco Global go up and down completely randomly.

Pair Corralation between Madison Small and Invesco Global

Assuming the 90 days horizon Madison Small Cap is expected to generate 1.57 times more return on investment than Invesco Global. However, Madison Small is 1.57 times more volatile than Invesco Global Real. It trades about 0.03 of its potential returns per unit of risk. Invesco Global Real is currently generating about -0.01 per unit of risk. If you would invest  1,020  in Madison Small Cap on May 6, 2025 and sell it today you would earn a total of  18.00  from holding Madison Small Cap or generate 1.76% return on investment over 90 days.

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

Madison Small Cap  vs.  Invesco Global Real

Madison Small Cap

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Small Cap are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Madison Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Global Real

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Madison Small and Invesco Global

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

The idea behind Madison Small Cap and Invesco Global Real 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.