Correlation Between Nexstar Broadcasting and Tandy Leather

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

By analyzing existing cross correlation between Nexstar Broadcasting Group and Tandy Leather Factory, you can compare the effects of market volatilities on Nexstar Broadcasting and Tandy Leather 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 Nexstar Broadcasting with a short position of Tandy Leather. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexstar Broadcasting and Tandy Leather.

Diversification Opportunities for Nexstar Broadcasting and Tandy Leather

-0.69

Correlation Coefficient

Nexstar Broadcasting  Tandy Leather

Excellent diversification

The 3 months correlation between Nexstar and Tandy is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nexstar Broadcasting Group and Tandy Leather Factory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tandy Leather Factory and Nexstar Broadcasting 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 Nexstar Broadcasting Group are associated (or correlated) with Tandy Leather. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tandy Leather Factory has no effect on the direction of Nexstar Broadcasting i.e., Nexstar Broadcasting and Tandy Leather go up and down completely randomly.

Pair Corralation between Nexstar Broadcasting and Tandy Leather

Given the investment horizon of 90 days Nexstar Broadcasting Group is expected to generate 0.78 times more return on investment than Tandy Leather. However, Nexstar Broadcasting Group is 1.28 times less risky than Tandy Leather. It trades about 0.11 of its potential returns per unit of risk. Tandy Leather Factory is currently generating about -0.07 per unit of risk. If you would invest  15,519  in Nexstar Broadcasting Group on December 28, 2024 and sell it today you would earn a total of  2,126  from holding Nexstar Broadcasting Group or generate 13.7% return on investment over 90 days.

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

Nexstar Broadcasting Group  vs.  Tandy Leather Factory

Nexstar Broadcasting

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nexstar Broadcasting Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Nexstar Broadcasting unveiled solid returns over the last few months and may actually be approaching a breakup point.

Tandy Leather Factory

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tandy Leather Factory has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's essential 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 Nexstar Broadcasting and Tandy Leather

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

The idea behind Nexstar Broadcasting Group and Tandy Leather Factory 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.