Correlation Between Selan Exploration and Diligent Media

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

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

Diversification Opportunities for Selan Exploration and Diligent Media

-0.17

Correlation Coefficient

Selan Exploration  Diligent Media

Good diversification

The 3 months correlation between Selan and Diligent is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Selan Exploration Technology and Diligent Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diligent Media and Selan Exploration 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 Selan Exploration Technology are associated (or correlated) with Diligent Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diligent Media has no effect on the direction of Selan Exploration i.e., Selan Exploration and Diligent Media go up and down completely randomly.

Pair Corralation between Selan Exploration and Diligent Media

Assuming the 90 days trading horizon Selan Exploration Technology is expected to generate 0.97 times more return on investment than Diligent Media. However, Selan Exploration Technology is 1.03 times less risky than Diligent Media. It trades about 0.08 of its potential returns per unit of risk. Diligent Media is currently generating about 0.05 per unit of risk. If you would invest  27,320  in Selan Exploration Technology on October 26, 2024 and sell it today you would earn a total of  43,250  from holding Selan Exploration Technology or generate 158.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

Selan Exploration Technology  vs.  Diligent Media

Selan Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Selan Exploration Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Selan Exploration is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Diligent Media

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Diligent Media are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental indicators, Diligent Media demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Selan Exploration and Diligent Media

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

The idea behind Selan Exploration Technology and Diligent Media 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.