Correlation Between Gray Television and Cumulus Media

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

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

Diversification Opportunities for Gray Television and Cumulus Media

0.18

Correlation Coefficient

Gray Television  Cumulus Media

Average diversification

The 3 months correlation between Gray and Cumulus is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Gray Television and Cumulus Media Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cumulus Media Class and Gray Television 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 Gray Television are associated (or correlated) with Cumulus Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cumulus Media Class has no effect on the direction of Gray Television i.e., Gray Television and Cumulus Media go up and down completely randomly.

Pair Corralation between Gray Television and Cumulus Media

Considering the 90-day investment horizon Gray Television is expected to generate 8.2 times less return on investment than Cumulus Media. But when comparing it to its historical volatility, Gray Television is 1.22 times less risky than Cumulus Media. It trades about 0.01 of its potential returns per unit of risk. Cumulus Media Class is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  78.00  in Cumulus Media Class on November 28, 2024 and sell it today you would earn a total of  10.00  from holding Cumulus Media Class or generate 12.82% return on investment over 90 days.

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

Gray Television  vs.  Cumulus Media Class

Gray Television

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gray Television has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Gray Television is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Cumulus Media Class

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cumulus Media Class are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Cumulus Media unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gray Television and Cumulus Media

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

The idea behind Gray Television and Cumulus Media Class 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.