Correlation Between Berkeley Energia and Media Investment

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

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

Diversification Opportunities for Berkeley Energia and Media Investment

-0.44

Correlation Coefficient

Berkeley Energia  Media Investment

Very good diversification

The 3 months correlation between Berkeley and Media is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Berkeley Energia Limited and Media Investment Optimization in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Media Investment Opt and Berkeley Energia 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 Berkeley Energia Limited are associated (or correlated) with Media Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Media Investment Opt has no effect on the direction of Berkeley Energia i.e., Berkeley Energia and Media Investment go up and down completely randomly.

Pair Corralation between Berkeley Energia and Media Investment

Assuming the 90 days trading horizon Berkeley Energia Limited is expected to generate 2.69 times more return on investment than Media Investment. However, Berkeley Energia is 2.69 times more volatile than Media Investment Optimization. It trades about 0.06 of its potential returns per unit of risk. Media Investment Optimization is currently generating about -0.2 per unit of risk. If you would invest  21.00  in Berkeley Energia Limited on November 28, 2024 and sell it today you would earn a total of  2.00  from holding Berkeley Energia Limited or generate 9.52% return on investment over 90 days.

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

Berkeley Energia Limited  vs.  Media Investment Optimization

Berkeley Energia

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Berkeley Energia Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Berkeley Energia exhibited solid returns over the last few months and may actually be approaching a breakup point.

Media Investment Opt

Risk-Adjusted Performance

Very Weak

Over the last 90 days Media Investment Optimization has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Berkeley Energia and Media Investment

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

The idea behind Berkeley Energia Limited and Media Investment Optimization 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.