Correlation Between Wilmington Diversified and Madison Small

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

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

Diversification Opportunities for Wilmington Diversified and Madison Small

0.81

Correlation Coefficient

Wilmington Diversified  Madison Small

Very poor diversification

The 3 months correlation between Wilmington and Madison is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Wilmington Diversified Income and Madison Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Small Cap and Wilmington Diversified 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 Wilmington Diversified Income are associated (or correlated) with Madison Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Small Cap has no effect on the direction of Wilmington Diversified i.e., Wilmington Diversified and Madison Small go up and down completely randomly.

Pair Corralation between Wilmington Diversified and Madison Small

Assuming the 90 days horizon Wilmington Diversified Income is expected to generate 0.57 times more return on investment than Madison Small. However, Wilmington Diversified Income is 1.75 times less risky than Madison Small. It trades about 0.18 of its potential returns per unit of risk. Madison Small Cap is currently generating about 0.04 per unit of risk. If you would invest  1,298  in Wilmington Diversified Income on May 4, 2025 and sell it today you would earn a total of  102.00  from holding Wilmington Diversified Income or generate 7.86% return on investment over 90 days.

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

Wilmington Diversified Income  vs.  Madison Small Cap

Wilmington Diversified

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wilmington Diversified Income are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Wilmington Diversified may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Madison Small Cap

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Small Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Madison Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wilmington Diversified and Madison Small

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

The idea behind Wilmington Diversified Income and Madison Small 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.