Correlation Between Gray Television and Marchex

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

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

Diversification Opportunities for Gray Television and Marchex

0.19

Correlation Coefficient

Gray Television  Marchex

Average diversification

The 3 months correlation between Gray and Marchex is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Gray Television and Marchex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marchex 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 Marchex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marchex has no effect on the direction of Gray Television i.e., Gray Television and Marchex go up and down completely randomly.

Pair Corralation between Gray Television and Marchex

Considering the 90-day investment horizon Gray Television is expected to under-perform the Marchex. In addition to that, Gray Television is 1.74 times more volatile than Marchex. It trades about -0.17 of its total potential returns per unit of risk. Marchex is currently generating about 0.02 per unit of volatility. If you would invest  177.00  in Marchex on September 4, 2024 and sell it today you would earn a total of  1.00  from holding Marchex or generate 0.56% 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.  Marchex

Gray Television

Risk-Adjusted Performance

0 of 100

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.

Marchex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marchex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Marchex is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gray Television and Marchex

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

The idea behind Gray Television and Marchex 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.