Correlation Between DC Media and Nasmedia
Can any of the company-specific risk be diversified away by investing in both DC Media and Nasmedia 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 DC Media and Nasmedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DC Media Co and Nasmedia Co, you can compare the effects of market volatilities on DC Media and Nasmedia 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 DC Media with a short position of Nasmedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of DC Media and Nasmedia.
Diversification Opportunities for DC Media and Nasmedia
Poor diversification
The 3 months correlation between 263720 and Nasmedia is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding DC Media Co and Nasmedia Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasmedia and DC Media 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 DC Media Co are associated (or correlated) with Nasmedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasmedia has no effect on the direction of DC Media i.e., DC Media and Nasmedia go up and down completely randomly.
Pair Corralation between DC Media and Nasmedia
Assuming the 90 days trading horizon DC Media Co is expected to generate 2.08 times more return on investment than Nasmedia. However, DC Media is 2.08 times more volatile than Nasmedia Co. It trades about 0.25 of its potential returns per unit of risk. Nasmedia Co is currently generating about -0.16 per unit of risk. If you would invest 1,732,000 in DC Media Co on August 29, 2024 and sell it today you would earn a total of 318,000 from holding DC Media Co or generate 18.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DC Media Co vs. Nasmedia Co
Performance |
| Timeline |
| DC Media |
| Nasmedia |
DC Media and Nasmedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DC Media and Nasmedia
The main advantage of trading using opposite DC Media and Nasmedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DC Media position performs unexpectedly, Nasmedia 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 Nasmedia will offset losses from the drop in Nasmedia's long position.| DC Media vs. Busan Industrial Co | DC Media vs. Busan Ind | DC Media vs. Mirae Asset Daewoo | DC Media vs. UNISEM Co |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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