Correlation Between New Wave and Seven Arts
Can any of the company-specific risk be diversified away by investing in both New Wave and Seven Arts 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 New Wave and Seven Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Wave Holdings and Seven Arts Entertainment, you can compare the effects of market volatilities on New Wave and Seven Arts 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 New Wave with a short position of Seven Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Wave and Seven Arts.
Diversification Opportunities for New Wave and Seven Arts
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between New and Seven is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding New Wave Holdings and Seven Arts Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seven Arts Entertainment and New Wave 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 New Wave Holdings are associated (or correlated) with Seven Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seven Arts Entertainment has no effect on the direction of New Wave i.e., New Wave and Seven Arts go up and down completely randomly.
Pair Corralation between New Wave and Seven Arts
Assuming the 90 days horizon New Wave Holdings is expected to generate 3.39 times more return on investment than Seven Arts. However, New Wave is 3.39 times more volatile than Seven Arts Entertainment. It trades about 0.07 of its potential returns per unit of risk. Seven Arts Entertainment is currently generating about 0.06 per unit of risk. If you would invest 1.52 in New Wave Holdings on September 14, 2024 and sell it today you would lose (0.72) from holding New Wave Holdings or give up 47.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.19% |
| Values | Daily Returns |
New Wave Holdings vs. Seven Arts Entertainment
Performance |
| Timeline |
| New Wave Holdings |
| Seven Arts Entertainment |
New Wave and Seven Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Wave and Seven Arts
The main advantage of trading using opposite New Wave and Seven Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Wave position performs unexpectedly, Seven Arts 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 Seven Arts will offset losses from the drop in Seven Arts' long position.| New Wave vs. ZoomerMedia Limited | New Wave vs. OverActive Media Corp | New Wave vs. Network Media Group | New Wave vs. Celtic plc |
| Seven Arts vs. Papaya Growth Opportunity | Seven Arts vs. HUMANA INC | Seven Arts vs. Barloworld Ltd ADR | Seven Arts vs. Morningstar Unconstrained Allocation |
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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