Correlation Between PM Capital and Nine Entertainment

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

By analyzing existing cross correlation between PM Capital Global and Nine Entertainment Co, you can compare the effects of market volatilities on PM Capital and Nine Entertainment 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 PM Capital with a short position of Nine Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of PM Capital and Nine Entertainment.

Diversification Opportunities for PM Capital and Nine Entertainment

0.51

Correlation Coefficient

PM Capital  Nine Entertainment

Very weak diversification

The 3 months correlation between PGF and Nine is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding PM Capital Global and Nine Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nine Entertainment and PM Capital 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 PM Capital Global are associated (or correlated) with Nine Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nine Entertainment has no effect on the direction of PM Capital i.e., PM Capital and Nine Entertainment go up and down completely randomly.

Pair Corralation between PM Capital and Nine Entertainment

Assuming the 90 days trading horizon PM Capital is expected to generate 1.82 times less return on investment than Nine Entertainment. But when comparing it to its historical volatility, PM Capital Global is 2.22 times less risky than Nine Entertainment. It trades about 0.16 of its potential returns per unit of risk. Nine Entertainment Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  122.00  in Nine Entertainment Co on December 28, 2024 and sell it today you would earn a total of  34.00  from holding Nine Entertainment Co or generate 27.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

PM Capital Global  vs.  Nine Entertainment Co

PM Capital Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PM Capital Global are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, PM Capital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Nine Entertainment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nine Entertainment Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Nine Entertainment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PM Capital and Nine Entertainment

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

The idea behind PM Capital Global and Nine Entertainment Co 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.