Correlation Between Phoenix New and Opera

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

Diversification Opportunities for Phoenix New and Opera

-0.82

Correlation Coefficient

Phoenix New  Opera

Pay attention - limited upside

The 3 months correlation between Phoenix and Opera is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Phoenix New Media and Opera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opera 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 Opera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opera has no effect on the direction of Phoenix New i.e., Phoenix New and Opera go up and down completely randomly.

Pair Corralation between Phoenix New and Opera

Given the investment horizon of 90 days Phoenix New Media is expected to generate 2.09 times more return on investment than Opera. However, Phoenix New is 2.09 times more volatile than Opera. It trades about 0.07 of its potential returns per unit of risk. Opera is currently generating about 0.07 per unit of risk. If you would invest  133.00  in Phoenix New Media on September 17, 2024 and sell it today you would earn a total of  136.00  from holding Phoenix New Media or generate 102.26% return on investment over 90 days.

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

Phoenix New Media  vs.  Opera

Phoenix New Media

Risk-Adjusted Performance

0 of 100

Very Weak

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

Opera

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Opera are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Opera sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phoenix New and Opera

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

The idea behind Phoenix New Media and Opera 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.