Correlation Between CyberAgent and Marchex

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

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

Diversification Opportunities for CyberAgent and Marchex

0.05

Correlation Coefficient

CyberAgent  Marchex

Significant diversification

The 3 months correlation between CyberAgent and Marchex is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding CyberAgent ADR and Marchex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marchex and CyberAgent 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 CyberAgent ADR are associated (or correlated) with Marchex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marchex has no effect on the direction of CyberAgent i.e., CyberAgent and Marchex go up and down completely randomly.

Pair Corralation between CyberAgent and Marchex

Assuming the 90 days horizon CyberAgent ADR is expected to generate 0.77 times more return on investment than Marchex. However, CyberAgent ADR is 1.3 times less risky than Marchex. It trades about 0.01 of its potential returns per unit of risk. Marchex is currently generating about -0.02 per unit of risk. If you would invest  314.00  in CyberAgent ADR on September 2, 2024 and sell it today you would lose (1.00) from holding CyberAgent ADR or give up 0.32% of portfolio value over 90 days.

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

CyberAgent ADR  vs.  Marchex

CyberAgent ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CyberAgent ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, CyberAgent is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Marchex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marchex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Marchex is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CyberAgent and Marchex

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

The idea behind CyberAgent ADR and Marchex 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.