Correlation Between Old Westbury and Madison Mid

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

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

Diversification Opportunities for Old Westbury and Madison Mid

0.06

Correlation Coefficient

Old Westbury  Madison Mid

Significant diversification

The 3 months correlation between Old and Madison is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Old Westbury Short Term 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 Old Westbury 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 Old Westbury Short Term 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 Old Westbury i.e., Old Westbury and Madison Mid go up and down completely randomly.

Pair Corralation between Old Westbury and Madison Mid

Assuming the 90 days horizon Old Westbury Short Term is not expected to generate positive returns. However, Old Westbury Short Term is 12.64 times less risky than Madison Mid. It waists most of its returns potential to compensate for thr risk taken. Madison Mid is generating about 0.16 per unit of risk. If you would invest  1,610  in Madison Mid Cap on March 2, 2025 and sell it today you would earn a total of  67.00  from holding Madison Mid Cap or generate 4.16% return on investment over 90 days.

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

Old Westbury Short Term  vs.  Madison Mid Cap

Old Westbury Short

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Old Westbury Short Term are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Old Westbury is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Madison Mid Cap

Risk-Adjusted Performance

Very Weak

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 Old Westbury and Madison Mid

The main advantage of trading using opposite Old Westbury and Madison Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Westbury 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 Old Westbury Short Term 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..