Correlation Between Dentsu and Marchex

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

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

Diversification Opportunities for Dentsu and Marchex

0.54

Correlation Coefficient

Dentsu  Marchex

Very weak diversification

The 3 months correlation between Dentsu and Marchex is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Dentsu Inc and Marchex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marchex and Dentsu 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 Dentsu Inc 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 Dentsu i.e., Dentsu and Marchex go up and down completely randomly.

Pair Corralation between Dentsu and Marchex

Assuming the 90 days horizon Dentsu Inc is expected to under-perform the Marchex. In addition to that, Dentsu is 2.15 times more volatile than Marchex. It trades about -0.13 of its total potential returns per unit of risk. Marchex is currently generating about 0.06 per unit of volatility. If you would invest  178.00  in Marchex on September 23, 2024 and sell it today you would earn a total of  21.00  from holding Marchex or generate 11.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	20.0%
Values	Daily Returns

Dentsu Inc  vs.  Marchex

Dentsu Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dentsu Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Marchex

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Marchex are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical indicators, Marchex showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dentsu and Marchex

The main advantage of trading using opposite Dentsu and Marchex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dentsu 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 Dentsu Inc 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.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.