Correlation Between Premiere Entertainment and Transpacific Broadband

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

By analyzing existing cross correlation between Premiere Entertainment and Transpacific Broadband Group, you can compare the effects of market volatilities on Premiere Entertainment and Transpacific Broadband 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 Premiere Entertainment with a short position of Transpacific Broadband. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premiere Entertainment and Transpacific Broadband.

Diversification Opportunities for Premiere Entertainment and Transpacific Broadband

-0.08

Correlation Coefficient

Premiere Entertainment  Transpacific Broadband

Good diversification

The 3 months correlation between Premiere and Transpacific is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Premiere Entertainment and Transpacific Broadband Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transpacific Broadband and Premiere Entertainment 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 Premiere Entertainment are associated (or correlated) with Transpacific Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transpacific Broadband has no effect on the direction of Premiere Entertainment i.e., Premiere Entertainment and Transpacific Broadband go up and down completely randomly.

Pair Corralation between Premiere Entertainment and Transpacific Broadband

Assuming the 90 days trading horizon Premiere Entertainment is expected to under-perform the Transpacific Broadband. In addition to that, Premiere Entertainment is 1.05 times more volatile than Transpacific Broadband Group. It trades about -0.01 of its total potential returns per unit of risk. Transpacific Broadband Group is currently generating about -0.01 per unit of volatility. If you would invest  24.00  in Transpacific Broadband Group on October 5, 2024 and sell it today you would lose (10.00) from holding Transpacific Broadband Group or give up 41.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.08%
Values	Daily Returns

Premiere Entertainment  vs.  Transpacific Broadband Group

Premiere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premiere Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Transpacific Broadband

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Transpacific Broadband Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively unsteady basic indicators, Transpacific Broadband unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Premiere Entertainment and Transpacific Broadband

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

The idea behind Premiere Entertainment and Transpacific Broadband Group 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.