Correlation Between Madison Square and Graham Holdings

Can any of the company-specific risk be diversified away by investing in both Madison Square and Graham Holdings 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 Graham Holdings 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 Graham Holdings Co, you can compare the effects of market volatilities on Madison Square and Graham Holdings 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 Graham Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madison Square and Graham Holdings.

Diversification Opportunities for Madison Square and Graham Holdings

0.41

Correlation Coefficient

Madison Square  Graham Holdings

Very weak diversification

The 3 months correlation between Madison and Graham is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Madison Square Garden and Graham Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graham Holdings 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 Graham Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graham Holdings has no effect on the direction of Madison Square i.e., Madison Square and Graham Holdings go up and down completely randomly.

Pair Corralation between Madison Square and Graham Holdings

Given the investment horizon of 90 days Madison Square Garden is expected to under-perform the Graham Holdings. In addition to that, Madison Square is 1.74 times more volatile than Graham Holdings Co. It trades about -0.1 of its total potential returns per unit of risk. Graham Holdings Co is currently generating about 0.27 per unit of volatility. If you would invest  71,457  in Graham Holdings Co on February 12, 2024 and sell it today you would earn a total of  5,254  from holding Graham Holdings Co or generate 7.35% return on investment over 90 days.

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

Madison Square Garden  vs.  Graham Holdings Co

Madison Square Garden

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Square Garden are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Madison Square is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Graham Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Graham Holdings Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Graham Holdings is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Madison Square and Graham Holdings

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

The idea behind Madison Square Garden and Graham Holdings Co 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.