Correlation Between E Media and We Buy

Can any of the company-specific risk be diversified away by investing in both E Media and We Buy 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 We Buy 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 We Buy Cars, you can compare the effects of market volatilities on E Media and We Buy 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 We Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Media and We Buy.

Diversification Opportunities for E Media and We Buy

-0.42

Correlation Coefficient

E Media  We Buy

Very good diversification

The 3 months correlation between EMH and WBC is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding E Media Holdings and We Buy Cars in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on We Buy Cars 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 We Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of We Buy Cars has no effect on the direction of E Media i.e., E Media and We Buy go up and down completely randomly.

Pair Corralation between E Media and We Buy

Assuming the 90 days trading horizon E Media Holdings is expected to under-perform the We Buy. In addition to that, E Media is 1.34 times more volatile than We Buy Cars. It trades about -0.03 of its total potential returns per unit of risk. We Buy Cars is currently generating about 0.38 per unit of volatility. If you would invest  297,375  in We Buy Cars on September 15, 2024 and sell it today you would earn a total of  160,625  from holding We Buy Cars or generate 54.01% return on investment over 90 days.

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

E Media Holdings  vs.  We Buy Cars

E Media Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E Media Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

We Buy Cars

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in We Buy Cars are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, We Buy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with E Media and We Buy

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

The idea behind E Media Holdings and We Buy Cars 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.