Correlation Between Social Media and Global Develpmts

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

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

Diversification Opportunities for Social Media and Global Develpmts

0.0

Correlation Coefficient

Social Media  Global Develpmts

Pay attention - limited upside

The 3 months correlation between Social and Global is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Social Media Venture and Global Develpmts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Develpmts and Social Media 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 Social Media Venture are associated (or correlated) with Global Develpmts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Develpmts has no effect on the direction of Social Media i.e., Social Media and Global Develpmts go up and down completely randomly.

Pair Corralation between Social Media and Global Develpmts

If you would invest  1.01  in Global Develpmts on December 20, 2024 and sell it today you would lose (0.02) from holding Global Develpmts or give up 1.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Social Media Venture  vs.  Global Develpmts

Social Media Venture

Risk-Adjusted Performance

Very Weak

Over the last 90 days Social Media Venture has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Social Media is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Global Develpmts

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Develpmts are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Global Develpmts displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Social Media and Global Develpmts

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

The idea behind Social Media Venture and Global Develpmts 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.