Correlation Between OverActive Media and Telenor ASA

Can any of the company-specific risk be diversified away by investing in both OverActive Media and Telenor ASA 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 Telenor ASA 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 Telenor ASA ADR, you can compare the effects of market volatilities on OverActive Media and Telenor ASA 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 Telenor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of OverActive Media and Telenor ASA.

Diversification Opportunities for OverActive Media and Telenor ASA

0.43

Correlation Coefficient

OverActive Media  Telenor ASA

Very weak diversification

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

Pair Corralation between OverActive Media and Telenor ASA

Assuming the 90 days horizon OverActive Media Corp is expected to generate 18.1 times more return on investment than Telenor ASA. However, OverActive Media is 18.1 times more volatile than Telenor ASA ADR. It trades about 0.09 of its potential returns per unit of risk. Telenor ASA ADR is currently generating about 0.54 per unit of risk. If you would invest  15.00  in OverActive Media Corp on October 26, 2024 and sell it today you would earn a total of  1.00  from holding OverActive Media Corp or generate 6.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

OverActive Media Corp  vs.  Telenor ASA ADR

OverActive Media Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OverActive Media Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, OverActive Media is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Telenor ASA ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telenor ASA ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Telenor ASA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with OverActive Media and Telenor ASA

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

The idea behind OverActive Media Corp and Telenor ASA ADR 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.