Correlation Between Network Media and Medical Facilities

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

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

Diversification Opportunities for Network Media and Medical Facilities

0.17

Correlation Coefficient

Network Media  Medical Facilities

Average diversification

The 3 months correlation between Network and Medical is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Network Media Group and Medical Facilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Facilities and Network 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 Network Media Group are associated (or correlated) with Medical Facilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Facilities has no effect on the direction of Network Media i.e., Network Media and Medical Facilities go up and down completely randomly.

Pair Corralation between Network Media and Medical Facilities

Assuming the 90 days horizon Network Media Group is expected to under-perform the Medical Facilities. In addition to that, Network Media is 2.03 times more volatile than Medical Facilities. It trades about -0.01 of its total potential returns per unit of risk. Medical Facilities is currently generating about 0.04 per unit of volatility. If you would invest  1,530  in Medical Facilities on December 30, 2024 and sell it today you would earn a total of  67.00  from holding Medical Facilities or generate 4.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Network Media Group  vs.  Medical Facilities

Network Media Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Network Media Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Network Media is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Medical Facilities

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Facilities are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Medical Facilities is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Network Media and Medical Facilities

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

The idea behind Network Media Group and Medical Facilities 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.