Correlation Between Multimedia Portfolio and Leisure Portfolio

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

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

Diversification Opportunities for Multimedia Portfolio and Leisure Portfolio

0.95

Correlation Coefficient

Multimedia Portfolio  Leisure Portfolio

Almost no diversification

The 3 months correlation between Multimedia and Leisure is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Multimedia Portfolio Multimedi and Leisure Portfolio Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leisure Portfolio Leisure and Multimedia Portfolio 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 Multimedia Portfolio Multimedia are associated (or correlated) with Leisure Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leisure Portfolio Leisure has no effect on the direction of Multimedia Portfolio i.e., Multimedia Portfolio and Leisure Portfolio go up and down completely randomly.

Pair Corralation between Multimedia Portfolio and Leisure Portfolio

Assuming the 90 days horizon Multimedia Portfolio is expected to generate 1.32 times less return on investment than Leisure Portfolio. In addition to that, Multimedia Portfolio is 1.18 times more volatile than Leisure Portfolio Leisure. It trades about 0.23 of its total potential returns per unit of risk. Leisure Portfolio Leisure is currently generating about 0.36 per unit of volatility. If you would invest  1,925  in Leisure Portfolio Leisure on September 2, 2024 and sell it today you would earn a total of  366.00  from holding Leisure Portfolio Leisure or generate 19.01% return on investment over 90 days.

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

Multimedia Portfolio Multimedi  vs.  Leisure Portfolio Leisure

Multimedia Portfolio

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Multimedia Portfolio Multimedia are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Multimedia Portfolio showed solid returns over the last few months and may actually be approaching a breakup point.

Leisure Portfolio Leisure

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Leisure Portfolio Leisure are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Leisure Portfolio showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Multimedia Portfolio and Leisure Portfolio

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

The idea behind Multimedia Portfolio Multimedia and Leisure Portfolio Leisure 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..