Correlation Between CU Tech and DC Media

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

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

Diversification Opportunities for CU Tech and DC Media

-0.61

Correlation Coefficient

CU Tech  DC Media

Excellent diversification

The 3 months correlation between 376290 and 263720 is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding CU Tech Corp and DC Media Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DC Media and CU Tech 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 CU Tech Corp 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 CU Tech i.e., CU Tech and DC Media go up and down completely randomly.

Pair Corralation between CU Tech and DC Media

Assuming the 90 days trading horizon CU Tech Corp is expected to generate 0.42 times more return on investment than DC Media. However, CU Tech Corp is 2.35 times less risky than DC Media. It trades about 0.13 of its potential returns per unit of risk. DC Media Co is currently generating about -0.06 per unit of risk. If you would invest  292,500  in CU Tech Corp on December 23, 2024 and sell it today you would earn a total of  27,500  from holding CU Tech Corp or generate 9.4% return on investment over 90 days.

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

CU Tech Corp  vs.  DC Media Co

CU Tech Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CU Tech Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CU Tech may actually be approaching a critical reversion point that can send shares even higher in April 2025.

DC Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days DC Media 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 CU Tech and DC Media

The main advantage of trading using opposite CU Tech and DC Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CU Tech 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 CU Tech Corp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..