Correlation Between Global Entertainment and Roku

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

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

Diversification Opportunities for Global Entertainment and Roku

0.32

Correlation Coefficient

Global Entertainment  Roku

Weak diversification

The 3 months correlation between Global and Roku is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Global Entertainment Holdings and Roku Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roku Inc and Global Entertainment 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 Global Entertainment Holdings are associated (or correlated) with Roku. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roku Inc has no effect on the direction of Global Entertainment i.e., Global Entertainment and Roku go up and down completely randomly.

Pair Corralation between Global Entertainment and Roku

Given the investment horizon of 90 days Global Entertainment Holdings is expected to generate 6.89 times more return on investment than Roku. However, Global Entertainment is 6.89 times more volatile than Roku Inc. It trades about 0.08 of its potential returns per unit of risk. Roku Inc is currently generating about 0.06 per unit of risk. If you would invest  0.01  in Global Entertainment Holdings on September 15, 2024 and sell it today you would earn a total of  0.00  from holding Global Entertainment Holdings or generate 0.0% return on investment over 90 days.

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

Global Entertainment Holdings  vs.  Roku Inc

Global Entertainment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Entertainment Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain technical indicators, Global Entertainment disclosed solid returns over the last few months and may actually be approaching a breakup point.

Roku Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Roku Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting forward-looking signals, Roku unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Entertainment and Roku

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

The idea behind Global Entertainment Holdings and Roku Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.