Correlation Between Media and Benchmark Electronics
Can any of the company-specific risk be diversified away by investing in both Media and Benchmark Electronics 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 Media and Benchmark Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Media and Games and Benchmark Electronics, you can compare the effects of market volatilities on Media and Benchmark Electronics 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 Media with a short position of Benchmark Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Media and Benchmark Electronics.
Diversification Opportunities for Media and Benchmark Electronics
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Media and Benchmark is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Media and Games and Benchmark Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Electronics and 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 Media and Games are associated (or correlated) with Benchmark Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Electronics has no effect on the direction of Media i.e., Media and Benchmark Electronics go up and down completely randomly.
Pair Corralation between Media and Benchmark Electronics
Assuming the 90 days trading horizon Media and Games is expected to generate 1.65 times more return on investment than Benchmark Electronics. However, Media is 1.65 times more volatile than Benchmark Electronics. It trades about 0.07 of its potential returns per unit of risk. Benchmark Electronics is currently generating about 0.06 per unit of risk. If you would invest 163.00 in Media and Games on August 25, 2024 and sell it today you would earn a total of 237.00 from holding Media and Games or generate 145.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Media and Games vs. Benchmark Electronics
Performance |
| Timeline |
| Media and Games |
| Benchmark Electronics |
Media and Benchmark Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Media and Benchmark Electronics
The main advantage of trading using opposite Media and Benchmark Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Media position performs unexpectedly, Benchmark Electronics 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 Benchmark Electronics will offset losses from the drop in Benchmark Electronics' long position.| Media vs. GALENA MINING LTD | Media vs. New Residential Investment | Media vs. Chuangs China Investments | Media vs. CDL 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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