Correlation Between Seven West and Prosiebensat

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

By analyzing existing cross correlation between Seven West Media and Prosiebensat 1 Media, you can compare the effects of market volatilities on Seven West and Prosiebensat 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 Seven West with a short position of Prosiebensat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seven West and Prosiebensat.

Diversification Opportunities for Seven West and Prosiebensat

0.46

Correlation Coefficient

Seven West  Prosiebensat

Very weak diversification

The 3 months correlation between Seven and Prosiebensat is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Seven West Media and Prosiebensat 1 Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosiebensat 1 Media and Seven West 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 Seven West Media are associated (or correlated) with Prosiebensat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosiebensat 1 Media has no effect on the direction of Seven West i.e., Seven West and Prosiebensat go up and down completely randomly.

Pair Corralation between Seven West and Prosiebensat

Assuming the 90 days horizon Seven West Media is expected to under-perform the Prosiebensat. But the stock apears to be less risky and, when comparing its historical volatility, Seven West Media is 1.13 times less risky than Prosiebensat. The stock trades about -0.32 of its potential returns per unit of risk. The Prosiebensat 1 Media is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  496.00  in Prosiebensat 1 Media on September 19, 2024 and sell it today you would earn a total of  33.00  from holding Prosiebensat 1 Media or generate 6.65% return on investment over 90 days.

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

Seven West Media  vs.  Prosiebensat 1 Media

Seven West Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seven West Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Prosiebensat 1 Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prosiebensat 1 Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Prosiebensat 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 Seven West and Prosiebensat

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

The idea behind Seven West Media and Prosiebensat 1 Media 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.