Correlation Between African Media and Clicks

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

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

Diversification Opportunities for African Media and Clicks

-0.32

Correlation Coefficient

African Media  Clicks

Very good diversification

The 3 months correlation between African and Clicks is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding African Media Entertainment and Clicks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clicks and African 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 African Media Entertainment are associated (or correlated) with Clicks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clicks has no effect on the direction of African Media i.e., African Media and Clicks go up and down completely randomly.

Pair Corralation between African Media and Clicks

Assuming the 90 days trading horizon African Media Entertainment is expected to generate 3.12 times more return on investment than Clicks. However, African Media is 3.12 times more volatile than Clicks. It trades about 0.07 of its potential returns per unit of risk. Clicks is currently generating about 0.13 per unit of risk. If you would invest  295,420  in African Media Entertainment on September 24, 2024 and sell it today you would earn a total of  134,480  from holding African Media Entertainment or generate 45.52% return on investment over 90 days.

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

African Media Entertainment  vs.  Clicks

African Media Entert

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in African Media Entertainment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, African Media exhibited solid returns over the last few months and may actually be approaching a breakup point.

Clicks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clicks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Clicks is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with African Media and Clicks

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

The idea behind African Media Entertainment and Clicks 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.