Correlation Between Overactive Media and Boat Rocker

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

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

Diversification Opportunities for Overactive Media and Boat Rocker

-0.45

Correlation Coefficient

Overactive Media  Boat Rocker

Very good diversification

The 3 months correlation between Overactive and Boat is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Overactive Media Corp and Boat Rocker Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boat Rocker Media and Overactive 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 Overactive Media Corp are associated (or correlated) with Boat Rocker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boat Rocker Media has no effect on the direction of Overactive Media i.e., Overactive Media and Boat Rocker go up and down completely randomly.

Pair Corralation between Overactive Media and Boat Rocker

Assuming the 90 days horizon Overactive Media Corp is expected to generate 1.11 times more return on investment than Boat Rocker. However, Overactive Media is 1.11 times more volatile than Boat Rocker Media. It trades about 0.13 of its potential returns per unit of risk. Boat Rocker Media is currently generating about -0.12 per unit of risk. If you would invest  20.00  in Overactive Media Corp on September 16, 2024 and sell it today you would earn a total of  8.00  from holding Overactive Media Corp or generate 40.0% return on investment over 90 days.

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

Overactive Media Corp  vs.  Boat Rocker Media

Overactive Media Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Overactive Media Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Overactive Media showed solid returns over the last few months and may actually be approaching a breakup point.

Boat Rocker Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boat Rocker Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Overactive Media and Boat Rocker

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

The idea behind Overactive Media Corp and Boat Rocker 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .