Correlation Between Roku and Sinclair Broadcast

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

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

Diversification Opportunities for Roku and Sinclair Broadcast

-0.27

Correlation Coefficient

Roku  Sinclair Broadcast

Very good diversification

The 3 months correlation between Roku and Sinclair is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Roku Inc and Sinclair Broadcast Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinclair Broadcast 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 Sinclair Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinclair Broadcast has no effect on the direction of Roku i.e., Roku and Sinclair Broadcast go up and down completely randomly.

Pair Corralation between Roku and Sinclair Broadcast

Given the investment horizon of 90 days Roku is expected to generate 2.74 times less return on investment than Sinclair Broadcast. In addition to that, Roku is 1.49 times more volatile than Sinclair Broadcast Group. It trades about 0.01 of its total potential returns per unit of risk. Sinclair Broadcast Group is currently generating about 0.02 per unit of volatility. If you would invest  1,536  in Sinclair Broadcast Group on December 28, 2024 and sell it today you would earn a total of  27.00  from holding Sinclair Broadcast Group or generate 1.76% 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.  Sinclair Broadcast Group

Roku Inc

Risk-Adjusted Performance

Weak

Over the last 90 days Roku Inc has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Sinclair Broadcast

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sinclair Broadcast Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Sinclair Broadcast is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Roku and Sinclair Broadcast

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

The idea behind Roku Inc and Sinclair Broadcast 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.