Correlation Between Thinkingdom Media and Masterwork Machinery

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

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

Diversification Opportunities for Thinkingdom Media and Masterwork Machinery

0.34

Correlation Coefficient

Thinkingdom Media  Masterwork Machinery

Weak diversification

The 3 months correlation between Thinkingdom and Masterwork is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Thinkingdom Media Group and Masterwork Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masterwork Machinery and Thinkingdom 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 Thinkingdom Media Group are associated (or correlated) with Masterwork Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masterwork Machinery has no effect on the direction of Thinkingdom Media i.e., Thinkingdom Media and Masterwork Machinery go up and down completely randomly.

Pair Corralation between Thinkingdom Media and Masterwork Machinery

Assuming the 90 days trading horizon Thinkingdom Media Group is expected to generate 0.81 times more return on investment than Masterwork Machinery. However, Thinkingdom Media Group is 1.23 times less risky than Masterwork Machinery. It trades about 0.07 of its potential returns per unit of risk. Masterwork Machinery is currently generating about 0.04 per unit of risk. If you would invest  1,767  in Thinkingdom Media Group on October 23, 2024 and sell it today you would earn a total of  216.00  from holding Thinkingdom Media Group or generate 12.22% return on investment over 90 days.

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

Thinkingdom Media Group  vs.  Masterwork Machinery

Thinkingdom Media

Risk-Adjusted Performance

5 of 100

Modest

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

Masterwork Machinery

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Masterwork Machinery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Masterwork Machinery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Thinkingdom Media and Masterwork Machinery

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

The idea behind Thinkingdom Media Group and Masterwork Machinery 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.