Correlation Between Seach Medical and Creative Media

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

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

Diversification Opportunities for Seach Medical and Creative Media

-0.2

Correlation Coefficient

Seach Medical  Creative Media

Good diversification

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

Pair Corralation between Seach Medical and Creative Media

Assuming the 90 days trading horizon Seach Medical is expected to generate 9.02 times less return on investment than Creative Media. But when comparing it to its historical volatility, Seach Medical Group is 20.29 times less risky than Creative Media. It trades about 0.1 of its potential returns per unit of risk. Creative Media Community is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  141,000  in Creative Media Community on October 26, 2024 and sell it today you would lose (113,450) from holding Creative Media Community or give up 80.46% of portfolio value over 90 days.

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

Seach Medical Group  vs.  Creative Media Community

Seach Medical Group

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Seach Medical Group are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seach Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Creative Media Community

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Creative Media Community are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Creative Media sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seach Medical and Creative Media

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

The idea behind Seach Medical Group and Creative Media Community 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.