Correlation Between Online Brands and Media

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

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

Diversification Opportunities for Online Brands and Media

-0.54

Correlation Coefficient

Online Brands  Media

Excellent diversification

The 3 months correlation between Online and Media is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Online Brands Nordic and Media and Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Media and Games and Online Brands 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 Online Brands Nordic are associated (or correlated) with Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Media and Games has no effect on the direction of Online Brands i.e., Online Brands and Media go up and down completely randomly.

Pair Corralation between Online Brands and Media

Assuming the 90 days trading horizon Online Brands Nordic is expected to generate 1.44 times more return on investment than Media. However, Online Brands is 1.44 times more volatile than Media and Games. It trades about 0.14 of its potential returns per unit of risk. Media and Games is currently generating about 0.03 per unit of risk. If you would invest  946.00  in Online Brands Nordic on September 15, 2024 and sell it today you would earn a total of  429.00  from holding Online Brands Nordic or generate 45.35% return on investment over 90 days.

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

Online Brands Nordic  vs.  Media and Games

Online Brands Nordic

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Online Brands Nordic are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Online Brands unveiled solid returns over the last few months and may actually be approaching a breakup point.

Media and Games

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Media and Games are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Media may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Online Brands and Media

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

The idea behind Online Brands Nordic and Media and Games 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.