Correlation Between Music Broadcast and Oriental Carbon

Can any of the company-specific risk be diversified away by investing in both Music Broadcast and Oriental Carbon 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 Music Broadcast and Oriental Carbon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Music Broadcast Limited and Oriental Carbon Chemicals, you can compare the effects of market volatilities on Music Broadcast and Oriental Carbon 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 Music Broadcast with a short position of Oriental Carbon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Music Broadcast and Oriental Carbon.

Diversification Opportunities for Music Broadcast and Oriental Carbon

0.55

Correlation Coefficient

Music Broadcast  Oriental Carbon

Very weak diversification

The 3 months correlation between Music and Oriental is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Music Broadcast Limited and Oriental Carbon Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Carbon Chemicals and Music Broadcast 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 Music Broadcast Limited are associated (or correlated) with Oriental Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Carbon Chemicals has no effect on the direction of Music Broadcast i.e., Music Broadcast and Oriental Carbon go up and down completely randomly.

Pair Corralation between Music Broadcast and Oriental Carbon

Assuming the 90 days trading horizon Music Broadcast is expected to generate 1.89 times less return on investment than Oriental Carbon. But when comparing it to its historical volatility, Music Broadcast Limited is 1.23 times less risky than Oriental Carbon. It trades about 0.03 of its potential returns per unit of risk. Oriental Carbon Chemicals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  23,245  in Oriental Carbon Chemicals on September 26, 2024 and sell it today you would earn a total of  424.00  from holding Oriental Carbon Chemicals or generate 1.82% return on investment over 90 days.

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

Music Broadcast Limited  vs.  Oriental Carbon Chemicals

Music Broadcast

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Music Broadcast Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Oriental Carbon Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oriental Carbon Chemicals 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.

Pair Trading with Music Broadcast and Oriental Carbon

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

The idea behind Music Broadcast Limited and Oriental Carbon Chemicals 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.