Correlation Between New Wave and Network Media

Can any of the company-specific risk be diversified away by investing in both New Wave and Network 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 New Wave and Network Media 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 Network Media Group, you can compare the effects of market volatilities on New Wave and Network 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 New Wave with a short position of Network Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Wave and Network Media.

Diversification Opportunities for New Wave and Network Media

0.16

Correlation Coefficient

New Wave  Network Media

Average diversification

The 3 months correlation between New and Network is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding New Wave Holdings and Network Media Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Network Media Group 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 Network Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Network Media Group has no effect on the direction of New Wave i.e., New Wave and Network Media go up and down completely randomly.

Pair Corralation between New Wave and Network Media

Assuming the 90 days horizon New Wave Holdings is expected to generate 3.06 times more return on investment than Network Media. However, New Wave is 3.06 times more volatile than Network Media Group. It trades about 0.06 of its potential returns per unit of risk. Network Media Group is currently generating about -0.01 per unit of risk. If you would invest  1.10  in New Wave Holdings on December 28, 2024 and sell it today you would earn a total of  0.02  from holding New Wave Holdings or generate 1.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

New Wave Holdings  vs.  Network Media Group

New Wave Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New Wave Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, New Wave reported solid returns over the last few months and may actually be approaching a breakup point.

Network Media Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Network Media Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Network Media is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with New Wave and Network Media

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

The idea behind New Wave Holdings and Network Media 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.