Correlation Between Roku and Hollywall Entertainment

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

By analyzing existing cross correlation between Roku Inc and Hollywall Entertainment, you can compare the effects of market volatilities on Roku and Hollywall Entertainment 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 Hollywall Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roku and Hollywall Entertainment.

Diversification Opportunities for Roku and Hollywall Entertainment

-0.13

Correlation Coefficient

Roku  Hollywall Entertainment

Good diversification

The 3 months correlation between Roku and Hollywall is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Roku Inc and Hollywall Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hollywall Entertainment 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 Hollywall Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hollywall Entertainment has no effect on the direction of Roku i.e., Roku and Hollywall Entertainment go up and down completely randomly.

Pair Corralation between Roku and Hollywall Entertainment

Given the investment horizon of 90 days Roku is expected to generate 64.42 times less return on investment than Hollywall Entertainment. But when comparing it to its historical volatility, Roku Inc is 8.28 times less risky than Hollywall Entertainment. It trades about 0.03 of its potential returns per unit of risk. Hollywall Entertainment is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2.60  in Hollywall Entertainment on December 28, 2024 and sell it today you would earn a total of  7.40  from holding Hollywall Entertainment or generate 284.62% 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.  Hollywall Entertainment

Roku Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Roku Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, Roku may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Hollywall Entertainment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hollywall Entertainment are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Hollywall Entertainment disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Roku and Hollywall Entertainment

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

The idea behind Roku Inc and Hollywall Entertainment 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.