Correlation Between Century Small and Multimedia Portfolio

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

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

Diversification Opportunities for Century Small and Multimedia Portfolio

0.82

Correlation Coefficient

Century Small  Multimedia Portfolio

Very poor diversification

The 3 months correlation between Century and Multimedia is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Century Small Cap and Multimedia Portfolio Multimedi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multimedia Portfolio and Century Small 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 Century Small Cap are associated (or correlated) with Multimedia Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multimedia Portfolio has no effect on the direction of Century Small i.e., Century Small and Multimedia Portfolio go up and down completely randomly.

Pair Corralation between Century Small and Multimedia Portfolio

Assuming the 90 days horizon Century Small is expected to generate 1.5 times less return on investment than Multimedia Portfolio. In addition to that, Century Small is 1.27 times more volatile than Multimedia Portfolio Multimedia. It trades about 0.15 of its total potential returns per unit of risk. Multimedia Portfolio Multimedia is currently generating about 0.28 per unit of volatility. If you would invest  10,019  in Multimedia Portfolio Multimedia on September 13, 2024 and sell it today you would earn a total of  1,691  from holding Multimedia Portfolio Multimedia or generate 16.88% return on investment over 90 days.

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

Century Small Cap  vs.  Multimedia Portfolio Multimedi

Century Small Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Century Small Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Century Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Multimedia Portfolio

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Multimedia Portfolio Multimedia are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Multimedia Portfolio showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Century Small and Multimedia Portfolio

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

The idea behind Century Small Cap and Multimedia Portfolio Multimedia 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.