Correlation Between Multimedia Portfolio and World Energy

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

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

Diversification Opportunities for Multimedia Portfolio and World Energy

0.77

Correlation Coefficient

Multimedia Portfolio  World Energy

Poor diversification

The 3 months correlation between Multimedia and World is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Multimedia Portfolio Multimedi and World Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Energy and Multimedia Portfolio 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 Multimedia Portfolio Multimedia are associated (or correlated) with World Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Energy has no effect on the direction of Multimedia Portfolio i.e., Multimedia Portfolio and World Energy go up and down completely randomly.

Pair Corralation between Multimedia Portfolio and World Energy

Assuming the 90 days horizon Multimedia Portfolio Multimedia is expected to generate 0.98 times more return on investment than World Energy. However, Multimedia Portfolio Multimedia is 1.02 times less risky than World Energy. It trades about 0.21 of its potential returns per unit of risk. World Energy Fund is currently generating about -0.24 per unit of risk. If you would invest  11,039  in Multimedia Portfolio Multimedia on September 19, 2024 and sell it today you would earn a total of  600.00  from holding Multimedia Portfolio Multimedia or generate 5.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Multimedia Portfolio Multimedi  vs.  World Energy Fund

Multimedia Portfolio

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Multimedia Portfolio Multimedia are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Multimedia Portfolio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

World Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in World Energy Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, World Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Multimedia Portfolio and World Energy

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

The idea behind Multimedia Portfolio Multimedia and World Energy Fund 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.