Correlation Between World Wireless and Magnite

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Can any of the company-specific risk be diversified away by investing in both World Wireless and Magnite 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 World Wireless and Magnite into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Wireless Communications and Magnite, you can compare the effects of market volatilities on World Wireless and Magnite 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 World Wireless with a short position of Magnite. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Wireless and Magnite.

Diversification Opportunities for World Wireless and Magnite

-0.53
  Correlation Coefficient

Excellent diversification

The 3 months correlation between World and Magnite is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding World Wireless Communications and Magnite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnite and World Wireless 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 World Wireless Communications are associated (or correlated) with Magnite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnite has no effect on the direction of World Wireless i.e., World Wireless and Magnite go up and down completely randomly.

Pair Corralation between World Wireless and Magnite

Given the investment horizon of 90 days World Wireless Communications is expected to generate 3.44 times more return on investment than Magnite. However, World Wireless is 3.44 times more volatile than Magnite. It trades about 0.02 of its potential returns per unit of risk. Magnite is currently generating about 0.04 per unit of risk. If you would invest  1.90  in World Wireless Communications on August 24, 2024 and sell it today you would lose (0.41) from holding World Wireless Communications or give up 21.58% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy9.27%
ValuesDaily Returns

World Wireless Communications  vs.  Magnite

 Performance 
       Timeline  
World Wireless Commu 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days World Wireless Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, World Wireless is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.
Magnite 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Magnite are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Magnite demonstrated solid returns over the last few months and may actually be approaching a breakup point.

World Wireless and Magnite Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with World Wireless and Magnite

The main advantage of trading using opposite World Wireless and Magnite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Wireless position performs unexpectedly, Magnite 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 Magnite will offset losses from the drop in Magnite's long position.
The idea behind World Wireless Communications and Magnite 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.
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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