Correlation Between Townsquare Media and Wayside Technology

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

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

Diversification Opportunities for Townsquare Media and Wayside Technology

0.17

Correlation Coefficient

Townsquare Media  Wayside Technology

Average diversification

The 3 months correlation between Townsquare and Wayside is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Townsquare Media and Wayside Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayside Technology and Townsquare 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 Townsquare Media are associated (or correlated) with Wayside Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wayside Technology has no effect on the direction of Townsquare Media i.e., Townsquare Media and Wayside Technology go up and down completely randomly.

Pair Corralation between Townsquare Media and Wayside Technology

Assuming the 90 days horizon Townsquare Media is expected to generate 0.72 times more return on investment than Wayside Technology. However, Townsquare Media is 1.38 times less risky than Wayside Technology. It trades about -0.07 of its potential returns per unit of risk. Wayside Technology Group is currently generating about -0.06 per unit of risk. If you would invest  935.00  in Townsquare Media on October 8, 2024 and sell it today you would lose (35.00) from holding Townsquare Media or give up 3.74% of portfolio value over 90 days.

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

Townsquare Media  vs.  Wayside Technology Group

Townsquare Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Townsquare Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Townsquare Media is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Wayside Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wayside Technology Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Wayside Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Townsquare Media and Wayside Technology

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

The idea behind Townsquare Media and Wayside Technology Group 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.