Correlation Between Reworld Media and Methanor
Can any of the company-specific risk be diversified away by investing in both Reworld Media and Methanor 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 Reworld Media and Methanor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reworld Media and Methanor, you can compare the effects of market volatilities on Reworld Media and Methanor 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 Reworld Media with a short position of Methanor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reworld Media and Methanor.
Diversification Opportunities for Reworld Media and Methanor
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Reworld and Methanor is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Reworld Media and Methanor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methanor and Reworld 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 Reworld Media are associated (or correlated) with Methanor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Methanor has no effect on the direction of Reworld Media i.e., Reworld Media and Methanor go up and down completely randomly.
Pair Corralation between Reworld Media and Methanor
Assuming the 90 days trading horizon Reworld Media is expected to under-perform the Methanor. But the stock apears to be less risky and, when comparing its historical volatility, Reworld Media is 1.72 times less risky than Methanor. The stock trades about -0.12 of its potential returns per unit of risk. The Methanor is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 180.00 in Methanor on October 16, 2024 and sell it today you would earn a total of 7.00 from holding Methanor or generate 3.89% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Reworld Media vs. Methanor
Performance |
Timeline |
Reworld Media |
Methanor |
Reworld Media and Methanor Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Reworld Media and Methanor
The main advantage of trading using opposite Reworld Media and Methanor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reworld Media position performs unexpectedly, Methanor 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 Methanor will offset losses from the drop in Methanor's long position.Reworld Media vs. Gaztransport Technigaz SAS | Reworld Media vs. Affluent Medical SAS | Reworld Media vs. Mediantechn | Reworld Media vs. Soditech SA |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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