Correlation Between Prime Office and North Media

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

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

Diversification Opportunities for Prime Office and North Media

0.5

Correlation Coefficient

Prime Office  North Media

Very weak diversification

The 3 months correlation between Prime and North is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Prime Office AS and North Media AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Media AS and Prime Office 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 Office AS are associated (or correlated) with North Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Media AS has no effect on the direction of Prime Office i.e., Prime Office and North Media go up and down completely randomly.

Pair Corralation between Prime Office and North Media

Assuming the 90 days trading horizon Prime Office AS is expected to under-perform the North Media. In addition to that, Prime Office is 1.24 times more volatile than North Media AS. It trades about -0.01 of its total potential returns per unit of risk. North Media AS is currently generating about -0.01 per unit of volatility. If you would invest  6,102  in North Media AS on October 8, 2024 and sell it today you would lose (862.00) from holding North Media AS or give up 14.13% of portfolio value over 90 days.

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

Prime Office AS  vs.  North Media AS

Prime Office AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prime Office AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Prime Office is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

North Media AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North Media AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Prime Office and North Media

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

The idea behind Prime Office AS and North Media AS 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.