Correlation Between ChipsMedia and Next Entertainment

Can any of the company-specific risk be diversified away by investing in both ChipsMedia and Next Entertainment 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 ChipsMedia and Next Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ChipsMedia and Next Entertainment World, you can compare the effects of market volatilities on ChipsMedia and Next Entertainment 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 ChipsMedia with a short position of Next Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of ChipsMedia and Next Entertainment.

Diversification Opportunities for ChipsMedia and Next Entertainment

0.67

Correlation Coefficient

ChipsMedia  Next Entertainment

Poor diversification

The 3 months correlation between ChipsMedia and Next is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding ChipsMedia and Next Entertainment World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next Entertainment World and ChipsMedia 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 ChipsMedia are associated (or correlated) with Next Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next Entertainment World has no effect on the direction of ChipsMedia i.e., ChipsMedia and Next Entertainment go up and down completely randomly.

Pair Corralation between ChipsMedia and Next Entertainment

Assuming the 90 days trading horizon ChipsMedia is expected to generate 30.04 times less return on investment than Next Entertainment. In addition to that, ChipsMedia is 1.0 times more volatile than Next Entertainment World. It trades about 0.0 of its total potential returns per unit of risk. Next Entertainment World is currently generating about 0.05 per unit of volatility. If you would invest  223,500  in Next Entertainment World on September 5, 2024 and sell it today you would earn a total of  12,500  from holding Next Entertainment World or generate 5.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

ChipsMedia  vs.  Next Entertainment World

ChipsMedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChipsMedia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ChipsMedia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Next Entertainment World

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Next Entertainment World are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Next Entertainment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ChipsMedia and Next Entertainment

The main advantage of trading using opposite ChipsMedia and Next Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ChipsMedia position performs unexpectedly, Next Entertainment 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 Next Entertainment will offset losses from the drop in Next Entertainment's long position.

The idea behind ChipsMedia and Next Entertainment World 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.