Correlation Between Cambridge Technology and Entertainment Network

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

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

Diversification Opportunities for Cambridge Technology and Entertainment Network

0.51

Correlation Coefficient

Cambridge Technology  Entertainment Network

Very weak diversification

The 3 months correlation between Cambridge and Entertainment is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Cambridge Technology Enterpris and Entertainment Network Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entertainment Network and Cambridge Technology 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 Cambridge Technology Enterprises are associated (or correlated) with Entertainment Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entertainment Network has no effect on the direction of Cambridge Technology i.e., Cambridge Technology and Entertainment Network go up and down completely randomly.

Pair Corralation between Cambridge Technology and Entertainment Network

Assuming the 90 days trading horizon Cambridge Technology Enterprises is expected to generate 0.95 times more return on investment than Entertainment Network. However, Cambridge Technology Enterprises is 1.05 times less risky than Entertainment Network. It trades about -0.06 of its potential returns per unit of risk. Entertainment Network Limited is currently generating about -0.1 per unit of risk. If you would invest  12,005  in Cambridge Technology Enterprises on September 28, 2024 and sell it today you would lose (2,047) from holding Cambridge Technology Enterprises or give up 17.05% of portfolio value over 90 days.

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

Cambridge Technology Enterpris  vs.  Entertainment Network Limited

Cambridge Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambridge Technology Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Entertainment Network

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entertainment Network Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Cambridge Technology and Entertainment Network

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

The idea behind Cambridge Technology Enterprises and Entertainment Network 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.