Correlation Between IAC and Trump Media

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

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

Diversification Opportunities for IAC and Trump Media

-0.35

Correlation Coefficient

IAC  Trump Media

Very good diversification

The 3 months correlation between IAC and Trump is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding IAC Inc and Trump Media Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trump Media Technology and IAC 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 IAC Inc are associated (or correlated) with Trump Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trump Media Technology has no effect on the direction of IAC i.e., IAC and Trump Media go up and down completely randomly.

Pair Corralation between IAC and Trump Media

Considering the 90-day investment horizon IAC Inc is expected to under-perform the Trump Media. But the stock apears to be less risky and, when comparing its historical volatility, IAC Inc is 3.94 times less risky than Trump Media. The stock trades about -0.03 of its potential returns per unit of risk. The Trump Media Technology is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,698  in Trump Media Technology on September 4, 2024 and sell it today you would earn a total of  1,551  from holding Trump Media Technology or generate 91.34% return on investment over 90 days.

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

IAC Inc  vs.  Trump Media Technology

IAC Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IAC Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IAC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Trump Media Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trump Media Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal forward-looking indicators, Trump Media unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IAC and Trump Media

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

The idea behind IAC Inc and Trump Media Technology 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.