Correlation Between Media and Xero

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

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

Diversification Opportunities for Media and Xero

0.02

Correlation Coefficient

Media  Xero

Significant diversification

The 3 months correlation between Media and Xero is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Media and Games and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero and Media 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 Media and Games are associated (or correlated) with Xero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xero has no effect on the direction of Media i.e., Media and Xero go up and down completely randomly.

Pair Corralation between Media and Xero

Assuming the 90 days trading horizon Media and Games is expected to generate 2.06 times more return on investment than Xero. However, Media is 2.06 times more volatile than Xero. It trades about 0.02 of its potential returns per unit of risk. Xero is currently generating about -0.08 per unit of risk. If you would invest  332.00  in Media and Games on December 20, 2024 and sell it today you would earn a total of  2.00  from holding Media and Games or generate 0.6% return on investment over 90 days.

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

Media and Games  vs.  Xero

Media and Games

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Media and Games are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Media is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Xero

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xero has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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 Media and Xero

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

The idea behind Media and Games and Xero 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.