Correlation Between C Media and Newretail
Can any of the company-specific risk be diversified away by investing in both C Media and Newretail 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 C Media and Newretail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between C Media Electronics and Newretail Co, you can compare the effects of market volatilities on C Media and Newretail 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 C Media with a short position of Newretail. Check out your portfolio center. Please also check ongoing floating volatility patterns of C Media and Newretail.
Diversification Opportunities for C Media and Newretail
Average diversification
The 3 months correlation between 6237 and Newretail is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding C Media Electronics and Newretail Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newretail and C 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 C Media Electronics are associated (or correlated) with Newretail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newretail has no effect on the direction of C Media i.e., C Media and Newretail go up and down completely randomly.
Pair Corralation between C Media and Newretail
Assuming the 90 days trading horizon C Media Electronics is expected to generate 1.23 times more return on investment than Newretail. However, C Media is 1.23 times more volatile than Newretail Co. It trades about 0.07 of its potential returns per unit of risk. Newretail Co is currently generating about -0.17 per unit of risk. If you would invest 5,480 in C Media Electronics on November 6, 2024 and sell it today you would earn a total of 150.00 from holding C Media Electronics or generate 2.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
C Media Electronics vs. Newretail Co
Performance |
| Timeline |
| C Media Electronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| Newretail |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
C Media and Newretail Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with C Media and Newretail
The main advantage of trading using opposite C Media and Newretail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if C Media position performs unexpectedly, Newretail 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 Newretail will offset losses from the drop in Newretail's long position.The idea behind C Media Electronics and Newretail Co 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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