Correlation Between INDIKA ENERGY and Townsquare Media

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

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

Diversification Opportunities for INDIKA ENERGY and Townsquare Media

0.61

Correlation Coefficient

INDIKA ENERGY  Townsquare Media

Poor diversification

The 3 months correlation between INDIKA and Townsquare is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding INDIKA ENERGY and Townsquare Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Townsquare Media and INDIKA ENERGY 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 INDIKA ENERGY are associated (or correlated) with Townsquare Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Townsquare Media has no effect on the direction of INDIKA ENERGY i.e., INDIKA ENERGY and Townsquare Media go up and down completely randomly.

Pair Corralation between INDIKA ENERGY and Townsquare Media

Assuming the 90 days trading horizon INDIKA ENERGY is expected to under-perform the Townsquare Media. In addition to that, INDIKA ENERGY is 1.01 times more volatile than Townsquare Media. It trades about -0.08 of its total potential returns per unit of risk. Townsquare Media is currently generating about -0.07 per unit of volatility. If you would invest  860.00  in Townsquare Media on December 30, 2024 and sell it today you would lose (95.00) from holding Townsquare Media or give up 11.05% of portfolio value over 90 days.

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

INDIKA ENERGY  vs.  Townsquare Media

INDIKA ENERGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days INDIKA ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Townsquare Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days Townsquare Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with INDIKA ENERGY and Townsquare Media

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

The idea behind INDIKA ENERGY and Townsquare Media 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 CEOs Directory module to screen CEOs from public companies around the world.