Correlation Between Microfriend and DC Media

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

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

Diversification Opportunities for Microfriend and DC Media

-0.46

Correlation Coefficient

Microfriend  DC Media

Very good diversification

The 3 months correlation between Microfriend and 263720 is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Microfriend and DC Media Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DC Media and Microfriend 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 Microfriend are associated (or correlated) with DC Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DC Media has no effect on the direction of Microfriend i.e., Microfriend and DC Media go up and down completely randomly.

Pair Corralation between Microfriend and DC Media

Assuming the 90 days trading horizon Microfriend is expected to under-perform the DC Media. But the stock apears to be less risky and, when comparing its historical volatility, Microfriend is 1.05 times less risky than DC Media. The stock trades about -0.03 of its potential returns per unit of risk. The DC Media Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,470,000  in DC Media Co on September 28, 2024 and sell it today you would lose (473,000) from holding DC Media Co or give up 19.15% of portfolio value over 90 days.

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

Microfriend  vs.  DC Media Co

Microfriend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microfriend has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

DC Media

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DC Media Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DC Media sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microfriend and DC Media

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

The idea behind Microfriend and DC Media 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.