Correlation Between WildBrain and Parkit Enterprise

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

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

Diversification Opportunities for WildBrain and Parkit Enterprise

-0.24

Correlation Coefficient

WildBrain  Parkit Enterprise

Very good diversification

The 3 months correlation between WildBrain and Parkit is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding WildBrain and Parkit Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parkit Enterprise and WildBrain 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 WildBrain are associated (or correlated) with Parkit Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parkit Enterprise has no effect on the direction of WildBrain i.e., WildBrain and Parkit Enterprise go up and down completely randomly.

Pair Corralation between WildBrain and Parkit Enterprise

Assuming the 90 days trading horizon WildBrain is expected to under-perform the Parkit Enterprise. But the stock apears to be less risky and, when comparing its historical volatility, WildBrain is 1.24 times less risky than Parkit Enterprise. The stock trades about -0.07 of its potential returns per unit of risk. The Parkit Enterprise is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  55.00  in Parkit Enterprise on September 5, 2024 and sell it today you would earn a total of  5.00  from holding Parkit Enterprise or generate 9.09% return on investment over 90 days.

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

WildBrain  vs.  Parkit Enterprise

WildBrain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WildBrain has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Parkit Enterprise

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Parkit Enterprise are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Parkit Enterprise showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WildBrain and Parkit Enterprise

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

The idea behind WildBrain and Parkit Enterprise 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.