Correlation Between Comcast and Paramount Global

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

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

Diversification Opportunities for Comcast and Paramount Global

0.87

Correlation Coefficient

Comcast  Paramount Global

Very poor diversification

The 3 months correlation between Comcast and Paramount is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Comcast and Paramount Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Global and Comcast 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 Comcast are associated (or correlated) with Paramount Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Global has no effect on the direction of Comcast i.e., Comcast and Paramount Global go up and down completely randomly.

Pair Corralation between Comcast and Paramount Global

Assuming the 90 days trading horizon Comcast is expected to generate 1.43 times less return on investment than Paramount Global. But when comparing it to its historical volatility, Comcast is 1.04 times less risky than Paramount Global. It trades about 0.08 of its potential returns per unit of risk. Paramount Global is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,850  in Paramount Global on September 12, 2024 and sell it today you would earn a total of  856.00  from holding Paramount Global or generate 14.63% return on investment over 90 days.

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

Comcast  vs.  Paramount Global

Comcast

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Comcast are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Comcast may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Paramount Global

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Paramount Global are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, Paramount Global sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Comcast and Paramount Global

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

The idea behind Comcast and Paramount Global 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.