Correlation Between Focus Media and Qingdao Citymedia

Can any of the company-specific risk be diversified away by investing in both Focus Media and Qingdao Citymedia 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 Focus Media and Qingdao Citymedia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Focus Media Information and Qingdao Citymedia Co, you can compare the effects of market volatilities on Focus Media and Qingdao Citymedia 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 Focus Media with a short position of Qingdao Citymedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focus Media and Qingdao Citymedia.

Diversification Opportunities for Focus Media and Qingdao Citymedia

0.64

Correlation Coefficient

Focus Media  Qingdao Citymedia

Poor diversification

The 3 months correlation between Focus and Qingdao is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Focus Media Information and Qingdao Citymedia Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Citymedia and Focus Media 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 Focus Media Information are associated (or correlated) with Qingdao Citymedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingdao Citymedia has no effect on the direction of Focus Media i.e., Focus Media and Qingdao Citymedia go up and down completely randomly.

Pair Corralation between Focus Media and Qingdao Citymedia

Assuming the 90 days trading horizon Focus Media Information is expected to generate 0.65 times more return on investment than Qingdao Citymedia. However, Focus Media Information is 1.54 times less risky than Qingdao Citymedia. It trades about -0.11 of its potential returns per unit of risk. Qingdao Citymedia Co is currently generating about -0.09 per unit of risk. If you would invest  702.00  in Focus Media Information on December 3, 2024 and sell it today you would lose (67.00) from holding Focus Media Information or give up 9.54% of portfolio value over 90 days.

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

Focus Media Information  vs.  Qingdao Citymedia Co

Focus Media Information

Risk-Adjusted Performance

Very Weak

Over the last 90 days Focus Media Information has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Qingdao Citymedia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Qingdao Citymedia Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Focus Media and Qingdao Citymedia

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

The idea behind Focus Media Information and Qingdao Citymedia 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.