Correlation Between Silly Monks and Diligent Media

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

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

Diversification Opportunities for Silly Monks and Diligent Media

0.34

Correlation Coefficient

Silly Monks  Diligent Media

Weak diversification

The 3 months correlation between Silly and Diligent is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Silly Monks Entertainment and Diligent Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diligent Media and Silly Monks 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 Silly Monks Entertainment 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 Silly Monks i.e., Silly Monks and Diligent Media go up and down completely randomly.

Pair Corralation between Silly Monks and Diligent Media

Assuming the 90 days trading horizon Silly Monks Entertainment is expected to under-perform the Diligent Media. But the stock apears to be less risky and, when comparing its historical volatility, Silly Monks Entertainment is 1.56 times less risky than Diligent Media. The stock trades about -0.06 of its potential returns per unit of risk. The Diligent Media is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  501.00  in Diligent Media on November 29, 2024 and sell it today you would earn a total of  55.00  from holding Diligent Media or generate 10.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Silly Monks Entertainment  vs.  Diligent Media

Silly Monks Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Silly Monks Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Diligent Media

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Diligent Media are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Diligent Media demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Silly Monks and Diligent Media

The main advantage of trading using opposite Silly Monks and Diligent Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silly Monks 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 Silly Monks Entertainment 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.