Correlation Between U Media and PlayNitride

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

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

Diversification Opportunities for U Media and PlayNitride

0.12

Correlation Coefficient

U Media  PlayNitride

Average diversification

The 3 months correlation between 6470 and PlayNitride is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding U Media Communications and PlayNitride in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PlayNitride and U 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 U Media Communications are associated (or correlated) with PlayNitride. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PlayNitride has no effect on the direction of U Media i.e., U Media and PlayNitride go up and down completely randomly.

Pair Corralation between U Media and PlayNitride

Assuming the 90 days trading horizon U Media Communications is expected to under-perform the PlayNitride. But the stock apears to be less risky and, when comparing its historical volatility, U Media Communications is 1.37 times less risky than PlayNitride. The stock trades about -0.05 of its potential returns per unit of risk. The PlayNitride is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  11,850  in PlayNitride on October 22, 2024 and sell it today you would earn a total of  9,500  from holding PlayNitride or generate 80.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.74%
Values	Daily Returns

U Media Communications  vs.  PlayNitride

U Media Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days U Media Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, U Media is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

PlayNitride

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PlayNitride are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, PlayNitride showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with U Media and PlayNitride

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

The idea behind U Media Communications and PlayNitride 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.