Correlation Between Overactive Media and ISign Media

Can any of the company-specific risk be diversified away by investing in both Overactive Media and ISign 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 Overactive Media and ISign Media 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 iSign Media Solutions, you can compare the effects of market volatilities on Overactive Media and ISign 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 Overactive Media with a short position of ISign Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Overactive Media and ISign Media.

Diversification Opportunities for Overactive Media and ISign Media

0.43

Correlation Coefficient

Overactive Media  ISign Media

Very weak diversification

The 3 months correlation between Overactive and ISign is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Overactive Media Corp and iSign Media Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iSign Media Solutions 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 ISign Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iSign Media Solutions has no effect on the direction of Overactive Media i.e., Overactive Media and ISign Media go up and down completely randomly.

Pair Corralation between Overactive Media and ISign Media

Assuming the 90 days horizon Overactive Media Corp is expected to generate 7.43 times more return on investment than ISign Media. However, Overactive Media is 7.43 times more volatile than iSign Media Solutions. It trades about 0.09 of its potential returns per unit of risk. iSign Media Solutions is currently generating about 0.27 per unit of risk. If you would invest  26.00  in Overactive Media Corp on September 16, 2024 and sell it today you would earn a total of  2.00  from holding Overactive Media Corp or generate 7.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Overactive Media Corp  vs.  iSign Media Solutions

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.

iSign Media Solutions

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iSign Media Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, ISign Media is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Overactive Media and ISign Media

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

The idea behind Overactive Media Corp and iSign Media Solutions 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.