Correlation Between Data Communications and Network Media

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

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

Diversification Opportunities for Data Communications and Network Media

0.63

Correlation Coefficient

Data Communications  Network Media

Poor diversification

The 3 months correlation between Data and Network is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Data Communications Management and Network Media Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Network Media Group and Data Communications 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 Data Communications Management are associated (or correlated) with Network Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Network Media Group has no effect on the direction of Data Communications i.e., Data Communications and Network Media go up and down completely randomly.

Pair Corralation between Data Communications and Network Media

Assuming the 90 days trading horizon Data Communications Management is expected to generate 0.92 times more return on investment than Network Media. However, Data Communications Management is 1.09 times less risky than Network Media. It trades about 0.12 of its potential returns per unit of risk. Network Media Group is currently generating about -0.05 per unit of risk. If you would invest  197.00  in Data Communications Management on October 7, 2024 and sell it today you would earn a total of  17.00  from holding Data Communications Management or generate 8.63% return on investment over 90 days.

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

Data Communications Management  vs.  Network Media Group

Data Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Data Communications Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Network Media Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Network Media Group 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 fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Data Communications and Network Media

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

The idea behind Data Communications Management and Network Media Group 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.