Correlation Between South32 and E Media

Can any of the company-specific risk be diversified away by investing in both South32 and E Media 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 South32 and E Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between South32 and E Media Holdings, you can compare the effects of market volatilities on South32 and E Media 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 South32 with a short position of E Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of South32 and E Media.

Diversification Opportunities for South32 and E Media

-0.2

Correlation Coefficient

South32  E Media

Good diversification

The 3 months correlation between South32 and EMH is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding South32 and E Media Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Media Holdings and South32 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 South32 are associated (or correlated) with E Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Media Holdings has no effect on the direction of South32 i.e., South32 and E Media go up and down completely randomly.

Pair Corralation between South32 and E Media

Assuming the 90 days trading horizon South32 is expected to under-perform the E Media. But the stock apears to be less risky and, when comparing its historical volatility, South32 is 22.87 times less risky than E Media. The stock trades about -0.02 of its potential returns per unit of risk. The E Media Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  37,732  in E Media Holdings on October 12, 2024 and sell it today you would lose (4,332) from holding E Media Holdings or give up 11.48% of portfolio value over 90 days.

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

South32  vs.  E Media Holdings

South32

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days South32 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

E Media Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in E Media Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, E Media is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with South32 and E Media

The main advantage of trading using opposite South32 and E Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South32 position performs unexpectedly, E Media 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 E Media will offset losses from the drop in E Media's long position.

The idea behind South32 and E Media Holdings 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.