Correlation Between Phoenix New and BuzzFeed

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

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

Diversification Opportunities for Phoenix New and BuzzFeed

-0.38

Correlation Coefficient

Phoenix New  BuzzFeed

Very good diversification

The 3 months correlation between Phoenix and BuzzFeed is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Phoenix New Media and BuzzFeed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BuzzFeed and Phoenix New 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 Phoenix New Media are associated (or correlated) with BuzzFeed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BuzzFeed has no effect on the direction of Phoenix New i.e., Phoenix New and BuzzFeed go up and down completely randomly.

Pair Corralation between Phoenix New and BuzzFeed

Given the investment horizon of 90 days Phoenix New Media is expected to under-perform the BuzzFeed. But the stock apears to be less risky and, when comparing its historical volatility, Phoenix New Media is 1.27 times less risky than BuzzFeed. The stock trades about -0.11 of its potential returns per unit of risk. The BuzzFeed is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  255.00  in BuzzFeed on September 2, 2024 and sell it today you would earn a total of  190.00  from holding BuzzFeed or generate 74.51% return on investment over 90 days.

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

Phoenix New Media  vs.  BuzzFeed

Phoenix New Media

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Phoenix New Media are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Phoenix New is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

BuzzFeed

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BuzzFeed are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, BuzzFeed exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phoenix New and BuzzFeed

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

The idea behind Phoenix New Media and BuzzFeed 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .