Correlation Between Pop Culture and OverActive Media

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

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

Diversification Opportunities for Pop Culture and OverActive Media

0.14

Correlation Coefficient

Pop Culture  OverActive Media

Average diversification

The 3 months correlation between Pop and OverActive is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Pop Culture Group and OverActive Media Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OverActive Media Corp and Pop Culture 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 Pop Culture Group are associated (or correlated) with OverActive Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OverActive Media Corp has no effect on the direction of Pop Culture i.e., Pop Culture and OverActive Media go up and down completely randomly.

Pair Corralation between Pop Culture and OverActive Media

Given the investment horizon of 90 days Pop Culture Group is expected to under-perform the OverActive Media. But the stock apears to be less risky and, when comparing its historical volatility, Pop Culture Group is 1.92 times less risky than OverActive Media. The stock trades about -0.01 of its potential returns per unit of risk. The OverActive Media Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  21.00  in OverActive Media Corp on October 26, 2024 and sell it today you would lose (5.00) from holding OverActive Media Corp or give up 23.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Pop Culture Group  vs.  OverActive Media Corp

Pop Culture Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pop Culture Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Pop Culture is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

OverActive Media Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OverActive Media Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, OverActive Media is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pop Culture and OverActive Media

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

The idea behind Pop Culture Group and OverActive Media Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.