Correlation Between E Media and Bytes Technology

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

By analyzing existing cross correlation between E Media Holdings and Bytes Technology, you can compare the effects of market volatilities on E Media and Bytes Technology 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 E Media with a short position of Bytes Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Media and Bytes Technology.

Diversification Opportunities for E Media and Bytes Technology

0.01

Correlation Coefficient

E Media  Bytes Technology

Significant diversification

The 3 months correlation between EMH and Bytes is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding E Media Holdings and Bytes Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bytes Technology and E Media 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 E Media Holdings are associated (or correlated) with Bytes Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bytes Technology has no effect on the direction of E Media i.e., E Media and Bytes Technology go up and down completely randomly.

Pair Corralation between E Media and Bytes Technology

Assuming the 90 days trading horizon E Media is expected to generate 6.48 times less return on investment than Bytes Technology. In addition to that, E Media is 1.21 times more volatile than Bytes Technology. It trades about 0.01 of its total potential returns per unit of risk. Bytes Technology is currently generating about 0.11 per unit of volatility. If you would invest  999,100  in Bytes Technology on December 26, 2024 and sell it today you would earn a total of  172,500  from holding Bytes Technology or generate 17.27% return on investment over 90 days.

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

E Media Holdings  vs.  Bytes Technology

E Media Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in E Media Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, E Media is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Bytes Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bytes Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Bytes Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with E Media and Bytes Technology

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

The idea behind E Media Holdings and Bytes Technology 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.