Correlation Between DRGEM and Nasmedia

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

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

Diversification Opportunities for DRGEM and Nasmedia

0.88

Correlation Coefficient

DRGEM  Nasmedia

Very poor diversification

The 3 months correlation between DRGEM and Nasmedia is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding DRGEM and Nasmedia Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasmedia and DRGEM 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 DRGEM are associated (or correlated) with Nasmedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasmedia has no effect on the direction of DRGEM i.e., DRGEM and Nasmedia go up and down completely randomly.

Pair Corralation between DRGEM and Nasmedia

Assuming the 90 days trading horizon DRGEM is expected to generate 1.25 times less return on investment than Nasmedia. But when comparing it to its historical volatility, DRGEM is 1.07 times less risky than Nasmedia. It trades about 0.08 of its potential returns per unit of risk. Nasmedia Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,381,380  in Nasmedia Co on October 12, 2024 and sell it today you would earn a total of  40,620  from holding Nasmedia Co or generate 2.94% return on investment over 90 days.

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

DRGEM  vs.  Nasmedia Co

DRGEM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DRGEM 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Nasmedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nasmedia Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nasmedia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with DRGEM and Nasmedia

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

The idea behind DRGEM and Nasmedia 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.