Correlation Between Paramount Global and Roku
Can any of the company-specific risk be diversified away by investing in both Paramount Global and Roku 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 Paramount Global and Roku into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Paramount Global and Roku Inc, you can compare the effects of market volatilities on Paramount Global and Roku 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 Paramount Global with a short position of Roku. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paramount Global and Roku.
Diversification Opportunities for Paramount Global and Roku
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Paramount and Roku is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Paramount Global and Roku Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roku Inc and Paramount Global 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 Paramount Global are associated (or correlated) with Roku. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roku Inc has no effect on the direction of Paramount Global i.e., Paramount Global and Roku go up and down completely randomly.
Pair Corralation between Paramount Global and Roku
Assuming the 90 days trading horizon Paramount Global is expected to generate 4.33 times less return on investment than Roku. But when comparing it to its historical volatility, Paramount Global is 1.06 times less risky than Roku. It trades about 0.01 of its potential returns per unit of risk. Roku Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,628 in Roku Inc on September 12, 2024 and sell it today you would earn a total of 913.00 from holding Roku Inc or generate 56.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.94% |
| Values | Daily Returns |
Paramount Global vs. Roku Inc
Performance |
| Timeline |
| Paramount Global |
| Roku Inc |
Paramount Global and Roku Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Paramount Global and Roku
The main advantage of trading using opposite Paramount Global and Roku positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paramount Global position performs unexpectedly, Roku 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 Roku will offset losses from the drop in Roku's long position.| Paramount Global vs. MAHLE Metal Leve | Paramount Global vs. American Airlines Group | Paramount Global vs. United Airlines Holdings | Paramount Global vs. Tyson Foods |
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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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