Correlation Between Sovereign Metals and One Media

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

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

Diversification Opportunities for Sovereign Metals and One Media

-0.12

Correlation Coefficient

Sovereign Metals  One Media

Good diversification

The 3 months correlation between Sovereign and One is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Sovereign Metals and One Media iP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Media iP and Sovereign Metals 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 Sovereign Metals are associated (or correlated) with One Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Media iP has no effect on the direction of Sovereign Metals i.e., Sovereign Metals and One Media go up and down completely randomly.

Pair Corralation between Sovereign Metals and One Media

Assuming the 90 days trading horizon Sovereign Metals is expected to generate 1.03 times more return on investment than One Media. However, Sovereign Metals is 1.03 times more volatile than One Media iP. It trades about 0.04 of its potential returns per unit of risk. One Media iP is currently generating about 0.0 per unit of risk. If you would invest  2,800  in Sovereign Metals on October 25, 2024 and sell it today you would earn a total of  1,050  from holding Sovereign Metals or generate 37.5% return on investment over 90 days.

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

Sovereign Metals  vs.  One Media iP

Sovereign Metals

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Sovereign Metals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

One Media iP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in One Media iP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, One Media unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sovereign Metals and One Media

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

The idea behind Sovereign Metals and One Media iP 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.