Correlation Between Magnite and Townsquare Media

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

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

Diversification Opportunities for Magnite and Townsquare Media

-0.29

Correlation Coefficient

Magnite  Townsquare Media

Very good diversification

The 3 months correlation between Magnite and Townsquare is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Magnite and Townsquare Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Townsquare Media and Magnite 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 Magnite 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 Magnite i.e., Magnite and Townsquare Media go up and down completely randomly.

Pair Corralation between Magnite and Townsquare Media

Given the investment horizon of 90 days Magnite is expected to generate 1.58 times more return on investment than Townsquare Media. However, Magnite is 1.58 times more volatile than Townsquare Media. It trades about 0.05 of its potential returns per unit of risk. Townsquare Media is currently generating about 0.04 per unit of risk. If you would invest  993.00  in Magnite on October 11, 2024 and sell it today you would earn a total of  653.00  from holding Magnite or generate 65.76% return on investment over 90 days.

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

Magnite  vs.  Townsquare Media

Magnite

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magnite are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Magnite demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Townsquare Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Townsquare Media has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Magnite and Townsquare Media

The main advantage of trading using opposite Magnite and Townsquare Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magnite 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 Magnite 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.