Correlation Between Prime Media and Transpacific Broadband

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

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

Diversification Opportunities for Prime Media and Transpacific Broadband

-0.37

Correlation Coefficient

Prime Media  Transpacific Broadband

Very good diversification

The 3 months correlation between Prime and Transpacific is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Prime Media Holdings and Transpacific Broadband Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transpacific Broadband and Prime 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 Prime Media Holdings 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 Prime Media i.e., Prime Media and Transpacific Broadband go up and down completely randomly.

Pair Corralation between Prime Media and Transpacific Broadband

Assuming the 90 days trading horizon Prime Media Holdings is expected to generate 2.45 times more return on investment than Transpacific Broadband. However, Prime Media is 2.45 times more volatile than Transpacific Broadband Group. It trades about 0.19 of its potential returns per unit of risk. Transpacific Broadband Group is currently generating about 0.01 per unit of risk. If you would invest  188.00  in Prime Media Holdings on October 10, 2024 and sell it today you would earn a total of  38.00  from holding Prime Media Holdings or generate 20.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Prime Media Holdings  vs.  Transpacific Broadband Group

Prime Media Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prime Media Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Transpacific Broadband

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transpacific Broadband Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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 Prime Media and Transpacific Broadband

The main advantage of trading using opposite Prime Media and Transpacific Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prime Media 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 Prime Media Holdings 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.