Correlation Between Music Broadcast and Thomas Scott

Can any of the company-specific risk be diversified away by investing in both Music Broadcast and Thomas Scott 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 Thomas Scott 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 Thomas Scott Limited, you can compare the effects of market volatilities on Music Broadcast and Thomas Scott 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 Thomas Scott. Check out your portfolio center. Please also check ongoing floating volatility patterns of Music Broadcast and Thomas Scott.

Diversification Opportunities for Music Broadcast and Thomas Scott

0.86

Correlation Coefficient

Music Broadcast  Thomas Scott

Very poor diversification

The 3 months correlation between Music and Thomas is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Music Broadcast Limited and Thomas Scott Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thomas Scott Limited 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 Thomas Scott. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thomas Scott Limited has no effect on the direction of Music Broadcast i.e., Music Broadcast and Thomas Scott go up and down completely randomly.

Pair Corralation between Music Broadcast and Thomas Scott

Assuming the 90 days trading horizon Music Broadcast Limited is expected to generate 0.73 times more return on investment than Thomas Scott. However, Music Broadcast Limited is 1.37 times less risky than Thomas Scott. It trades about -0.23 of its potential returns per unit of risk. Thomas Scott Limited is currently generating about -0.18 per unit of risk. If you would invest  1,261  in Music Broadcast Limited on December 28, 2024 and sell it today you would lose (343.00) from holding Music Broadcast Limited or give up 27.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Music Broadcast Limited  vs.  Thomas Scott Limited

Music Broadcast

Risk-Adjusted Performance

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 inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Thomas Scott Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thomas Scott Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Music Broadcast and Thomas Scott

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

The idea behind Music Broadcast Limited and Thomas Scott Limited 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.