Correlation Between Fox Corp and Lions Gate

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

By analyzing existing cross correlation between Fox Corp Class and Lions Gate Entertainment, you can compare the effects of market volatilities on Fox Corp and Lions Gate 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 Fox Corp with a short position of Lions Gate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fox Corp and Lions Gate.

Diversification Opportunities for Fox Corp and Lions Gate

0.47

Correlation Coefficient

Fox Corp  Lions Gate

Very weak diversification

The 3 months correlation between Fox and Lions is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Fox Corp Class and Lions Gate Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lions Gate Entertainment and Fox Corp 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 Fox Corp Class are associated (or correlated) with Lions Gate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lions Gate Entertainment has no effect on the direction of Fox Corp i.e., Fox Corp and Lions Gate go up and down completely randomly.

Pair Corralation between Fox Corp and Lions Gate

Given the investment horizon of 90 days Fox Corp Class is expected to generate 0.47 times more return on investment than Lions Gate. However, Fox Corp Class is 2.15 times less risky than Lions Gate. It trades about 0.21 of its potential returns per unit of risk. Lions Gate Entertainment is currently generating about -0.02 per unit of risk. If you would invest  4,664  in Fox Corp Class on September 22, 2024 and sell it today you would earn a total of  289.00  from holding Fox Corp Class or generate 6.2% return on investment over 90 days.

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

Fox Corp Class  vs.  Lions Gate Entertainment

Fox Corp Class

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fox Corp Class are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Fox Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Lions Gate Entertainment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lions Gate Entertainment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lions Gate may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fox Corp and Lions Gate

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

The idea behind Fox Corp Class and Lions Gate Entertainment 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.