Correlation Between PROSIEBENSAT1 MEDIADR4/ and TOWNSQUARE MEDIA

Can any of the company-specific risk be diversified away by investing in both PROSIEBENSAT1 MEDIADR4/ and TOWNSQUARE 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 PROSIEBENSAT1 MEDIADR4/ and TOWNSQUARE MEDIA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PROSIEBENSAT1 MEDIADR4 and TOWNSQUARE MEDIA INC, you can compare the effects of market volatilities on PROSIEBENSAT1 MEDIADR4/ and TOWNSQUARE 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 PROSIEBENSAT1 MEDIADR4/ with a short position of TOWNSQUARE MEDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of PROSIEBENSAT1 MEDIADR4/ and TOWNSQUARE MEDIA.

Diversification Opportunities for PROSIEBENSAT1 MEDIADR4/ and TOWNSQUARE MEDIA

0.32

Correlation Coefficient

PROSIEBENSAT1 MEDIADR4/  TOWNSQUARE MEDIA

Weak diversification

The 3 months correlation between PROSIEBENSAT1 and TOWNSQUARE is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding PROSIEBENSAT1 MEDIADR4 and TOWNSQUARE MEDIA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOWNSQUARE MEDIA INC and PROSIEBENSAT1 MEDIADR4/ 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 PROSIEBENSAT1 MEDIADR4 are associated (or correlated) with TOWNSQUARE MEDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOWNSQUARE MEDIA INC has no effect on the direction of PROSIEBENSAT1 MEDIADR4/ i.e., PROSIEBENSAT1 MEDIADR4/ and TOWNSQUARE MEDIA go up and down completely randomly.

Pair Corralation between PROSIEBENSAT1 MEDIADR4/ and TOWNSQUARE MEDIA

Assuming the 90 days trading horizon PROSIEBENSAT1 MEDIADR4 is expected to under-perform the TOWNSQUARE MEDIA. But the stock apears to be less risky and, when comparing its historical volatility, PROSIEBENSAT1 MEDIADR4 is 1.08 times less risky than TOWNSQUARE MEDIA. The stock trades about -0.12 of its potential returns per unit of risk. The TOWNSQUARE MEDIA INC is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  900.00  in TOWNSQUARE MEDIA INC on October 20, 2024 and sell it today you would lose (15.00) from holding TOWNSQUARE MEDIA INC or give up 1.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

PROSIEBENSAT1 MEDIADR4  vs.  TOWNSQUARE MEDIA INC

PROSIEBENSAT1 MEDIADR4/

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PROSIEBENSAT1 MEDIADR4 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

TOWNSQUARE MEDIA INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOWNSQUARE MEDIA INC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, TOWNSQUARE MEDIA is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PROSIEBENSAT1 MEDIADR4/ and TOWNSQUARE MEDIA

The main advantage of trading using opposite PROSIEBENSAT1 MEDIADR4/ and TOWNSQUARE MEDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PROSIEBENSAT1 MEDIADR4/ position performs unexpectedly, TOWNSQUARE 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 TOWNSQUARE MEDIA will offset losses from the drop in TOWNSQUARE MEDIA's long position.

The idea behind PROSIEBENSAT1 MEDIADR4 and TOWNSQUARE MEDIA INC 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.