Correlation Between Media and POWER METALS

Can any of the company-specific risk be diversified away by investing in both Media and POWER METALS 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 POWER METALS 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 POWER METALS, you can compare the effects of market volatilities on Media and POWER METALS 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 POWER METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Media and POWER METALS.

Diversification Opportunities for Media and POWER METALS

0.51

Correlation Coefficient

Media  POWER METALS

Very weak diversification

The 3 months correlation between Media and POWER is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Media and Games and POWER METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POWER METALS 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 POWER METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POWER METALS has no effect on the direction of Media i.e., Media and POWER METALS go up and down completely randomly.

Pair Corralation between Media and POWER METALS

Assuming the 90 days trading horizon Media and Games is expected to generate 1.17 times more return on investment than POWER METALS. However, Media is 1.17 times more volatile than POWER METALS. It trades about -0.09 of its potential returns per unit of risk. POWER METALS is currently generating about -0.15 per unit of risk. If you would invest  389.00  in Media and Games on August 31, 2024 and sell it today you would lose (37.00) from holding Media and Games or give up 9.51% of portfolio value over 90 days.

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

Media and Games  vs.  POWER METALS

Media and Games

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Media and Games are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Media unveiled solid returns over the last few months and may actually be approaching a breakup point.

POWER METALS

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in POWER METALS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, POWER METALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Media and POWER METALS

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

The idea behind Media and Games and POWER METALS 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.