Correlation Between Bodhi Tree and Network18 Media

Can any of the company-specific risk be diversified away by investing in both Bodhi Tree and Network18 Media 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 Bodhi Tree and Network18 Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bodhi Tree Multimedia and Network18 Media Investments, you can compare the effects of market volatilities on Bodhi Tree and Network18 Media 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 Bodhi Tree with a short position of Network18 Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bodhi Tree and Network18 Media.

Diversification Opportunities for Bodhi Tree and Network18 Media

0.07

Correlation Coefficient

Bodhi Tree  Network18 Media

Significant diversification

The 3 months correlation between Bodhi and Network18 is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Bodhi Tree Multimedia and Network18 Media Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Network18 Media Inve and Bodhi Tree 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 Bodhi Tree Multimedia are associated (or correlated) with Network18 Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Network18 Media Inve has no effect on the direction of Bodhi Tree i.e., Bodhi Tree and Network18 Media go up and down completely randomly.

Pair Corralation between Bodhi Tree and Network18 Media

Assuming the 90 days trading horizon Bodhi Tree Multimedia is expected to generate 1.29 times more return on investment than Network18 Media. However, Bodhi Tree is 1.29 times more volatile than Network18 Media Investments. It trades about -0.01 of its potential returns per unit of risk. Network18 Media Investments is currently generating about -0.15 per unit of risk. If you would invest  1,304  in Bodhi Tree Multimedia on October 22, 2024 and sell it today you would lose (86.00) from holding Bodhi Tree Multimedia or give up 6.6% of portfolio value over 90 days.

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

Bodhi Tree Multimedia  vs.  Network18 Media Investments

Bodhi Tree Multimedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bodhi Tree Multimedia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bodhi Tree is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Network18 Media Inve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Network18 Media Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Bodhi Tree and Network18 Media

The main advantage of trading using opposite Bodhi Tree and Network18 Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bodhi Tree position performs unexpectedly, Network18 Media 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 Network18 Media will offset losses from the drop in Network18 Media's long position.

The idea behind Bodhi Tree Multimedia and Network18 Media Investments 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.