Correlation Between Polaris Office and ChipsMedia

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

By analyzing existing cross correlation between Polaris Office Corp and ChipsMedia, you can compare the effects of market volatilities on Polaris Office and ChipsMedia 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 Polaris Office with a short position of ChipsMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polaris Office and ChipsMedia.

Diversification Opportunities for Polaris Office and ChipsMedia

0.41

Correlation Coefficient

Polaris Office  ChipsMedia

Very weak diversification

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

Pair Corralation between Polaris Office and ChipsMedia

Assuming the 90 days trading horizon Polaris Office Corp is expected to generate 1.46 times more return on investment than ChipsMedia. However, Polaris Office is 1.46 times more volatile than ChipsMedia. It trades about 0.09 of its potential returns per unit of risk. ChipsMedia is currently generating about -0.03 per unit of risk. If you would invest  544,000  in Polaris Office Corp on September 3, 2024 and sell it today you would earn a total of  109,000  from holding Polaris Office Corp or generate 20.04% return on investment over 90 days.

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

Polaris Office Corp  vs.  ChipsMedia

Polaris Office Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Polaris Office Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Polaris Office sustained solid returns over the last few months and may actually be approaching a breakup point.

ChipsMedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChipsMedia 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 Polaris Office and ChipsMedia

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

The idea behind Polaris Office Corp and ChipsMedia 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..