Correlation Between Sphere Entertainment and Nexstar Broadcasting

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

By analyzing existing cross correlation between Sphere Entertainment Co and Nexstar Broadcasting Group, you can compare the effects of market volatilities on Sphere Entertainment and Nexstar Broadcasting 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 Sphere Entertainment with a short position of Nexstar Broadcasting. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sphere Entertainment and Nexstar Broadcasting.

Diversification Opportunities for Sphere Entertainment and Nexstar Broadcasting

0.2

Correlation Coefficient

Sphere Entertainment  Nexstar Broadcasting

Modest diversification

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

Pair Corralation between Sphere Entertainment and Nexstar Broadcasting

Given the investment horizon of 90 days Sphere Entertainment Co is expected to generate 1.97 times more return on investment than Nexstar Broadcasting. However, Sphere Entertainment is 1.97 times more volatile than Nexstar Broadcasting Group. It trades about -0.11 of its potential returns per unit of risk. Nexstar Broadcasting Group is currently generating about -0.31 per unit of risk. If you would invest  4,110  in Sphere Entertainment Co on September 24, 2024 and sell it today you would lose (240.00) from holding Sphere Entertainment Co or give up 5.84% of portfolio value over 90 days.

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

Sphere Entertainment Co  vs.  Nexstar Broadcasting Group

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sphere Entertainment is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Nexstar Broadcasting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nexstar Broadcasting Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nexstar Broadcasting is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sphere Entertainment and Nexstar Broadcasting

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

The idea behind Sphere Entertainment Co and Nexstar Broadcasting Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.