Correlation Between New Wave and Genius Brands

Can any of the company-specific risk be diversified away by investing in both New Wave and Genius Brands 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 New Wave and Genius Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between New Wave Holdings and Genius Brands International, you can compare the effects of market volatilities on New Wave and Genius Brands 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 New Wave with a short position of Genius Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Wave and Genius Brands.

Diversification Opportunities for New Wave and Genius Brands

-0.11

Correlation Coefficient

New Wave  Genius Brands

Good diversification

The 3 months correlation between New and Genius is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding New Wave Holdings and Genius Brands International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genius Brands Intern and New Wave 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 New Wave Holdings are associated (or correlated) with Genius Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genius Brands Intern has no effect on the direction of New Wave i.e., New Wave and Genius Brands go up and down completely randomly.

Pair Corralation between New Wave and Genius Brands

Assuming the 90 days horizon New Wave Holdings is expected to generate 9.65 times more return on investment than Genius Brands. However, New Wave is 9.65 times more volatile than Genius Brands International. It trades about 0.08 of its potential returns per unit of risk. Genius Brands International is currently generating about -0.04 per unit of risk. If you would invest  1.47  in New Wave Holdings on September 24, 2024 and sell it today you would earn a total of  0.31  from holding New Wave Holdings or generate 21.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	24.1%
Values	Daily Returns

New Wave Holdings  vs.  Genius Brands International

New Wave Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New Wave Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, New Wave reported solid returns over the last few months and may actually be approaching a breakup point.

Genius Brands Intern

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with New Wave and Genius Brands

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

The idea behind New Wave Holdings and Genius Brands International 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.