Correlation Between Roku and Pop Culture

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

By analyzing existing cross correlation between Roku Inc and Pop Culture Group, you can compare the effects of market volatilities on Roku and Pop Culture 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 Roku with a short position of Pop Culture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roku and Pop Culture.

Diversification Opportunities for Roku and Pop Culture

-0.2

Correlation Coefficient

Roku  Pop Culture

Good diversification

The 3 months correlation between Roku and Pop is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Roku Inc and Pop Culture Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pop Culture Group and Roku 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 Roku Inc are associated (or correlated) with Pop Culture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pop Culture Group has no effect on the direction of Roku i.e., Roku and Pop Culture go up and down completely randomly.

Pair Corralation between Roku and Pop Culture

Given the investment horizon of 90 days Roku Inc is expected to generate 0.37 times more return on investment than Pop Culture. However, Roku Inc is 2.69 times less risky than Pop Culture. It trades about 0.06 of its potential returns per unit of risk. Pop Culture Group is currently generating about 0.02 per unit of risk. If you would invest  5,990  in Roku Inc on October 9, 2024 and sell it today you would earn a total of  1,809  from holding Roku Inc or generate 30.2% return on investment over 90 days.

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

Roku Inc  vs.  Pop Culture Group

Roku Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Roku Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking signals, Roku is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pop Culture Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pop Culture Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Pop Culture reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Roku and Pop Culture

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

The idea behind Roku Inc and Pop Culture 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.