Correlation Between Bodhi Tree and Paramount Communications

Can any of the company-specific risk be diversified away by investing in both Bodhi Tree and Paramount Communications 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 Paramount Communications 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 Paramount Communications Limited, you can compare the effects of market volatilities on Bodhi Tree and Paramount Communications 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 Paramount Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bodhi Tree and Paramount Communications.

Diversification Opportunities for Bodhi Tree and Paramount Communications

-0.22

Correlation Coefficient

Bodhi Tree  Paramount Communications

Very good diversification

The 3 months correlation between Bodhi and Paramount is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bodhi Tree Multimedia and Paramount Communications Limit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Communications 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 Paramount Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Communications has no effect on the direction of Bodhi Tree i.e., Bodhi Tree and Paramount Communications go up and down completely randomly.

Pair Corralation between Bodhi Tree and Paramount Communications

Assuming the 90 days trading horizon Bodhi Tree Multimedia is expected to under-perform the Paramount Communications. In addition to that, Bodhi Tree is 1.36 times more volatile than Paramount Communications Limited. It trades about -0.04 of its total potential returns per unit of risk. Paramount Communications Limited is currently generating about 0.06 per unit of volatility. If you would invest  7,970  in Paramount Communications Limited on October 8, 2024 and sell it today you would earn a total of  580.00  from holding Paramount Communications Limited or generate 7.28% return on investment over 90 days.

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

Bodhi Tree Multimedia  vs.  Paramount Communications Limit

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 latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Paramount Communications

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Paramount Communications Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting essential indicators, Paramount Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bodhi Tree and Paramount Communications

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

The idea behind Bodhi Tree Multimedia and Paramount Communications Limited 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.