Correlation Between Marchex and Gray Television

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

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

Diversification Opportunities for Marchex and Gray Television

-0.24

Correlation Coefficient

Marchex  Gray Television

Very good diversification

The 3 months correlation between Marchex and Gray is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Marchex and Gray Television in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gray Television and Marchex 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 Marchex are associated (or correlated) with Gray Television. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gray Television has no effect on the direction of Marchex i.e., Marchex and Gray Television go up and down completely randomly.

Pair Corralation between Marchex and Gray Television

Given the investment horizon of 90 days Marchex is expected to under-perform the Gray Television. But the stock apears to be less risky and, when comparing its historical volatility, Marchex is 1.4 times less risky than Gray Television. The stock trades about -0.02 of its potential returns per unit of risk. The Gray Television is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  295.00  in Gray Television on December 27, 2024 and sell it today you would earn a total of  174.00  from holding Gray Television or generate 58.98% return on investment over 90 days.

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

Marchex  vs.  Gray Television

Marchex

Risk-Adjusted Performance

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.

Gray Television

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gray Television are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Gray Television displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marchex and Gray Television

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

The idea behind Marchex and Gray Television 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.