Correlation Between News and Prosiebensat

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

By analyzing existing cross correlation between News Corporation and Prosiebensat 1 Media, you can compare the effects of market volatilities on News and Prosiebensat 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 News with a short position of Prosiebensat. Check out your portfolio center. Please also check ongoing floating volatility patterns of News and Prosiebensat.

Diversification Opportunities for News and Prosiebensat

-0.78

Correlation Coefficient

News  Prosiebensat

Pay attention - limited upside

The 3 months correlation between News and Prosiebensat is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding News Corp. and Prosiebensat 1 Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosiebensat 1 Media and News 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 News Corporation are associated (or correlated) with Prosiebensat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosiebensat 1 Media has no effect on the direction of News i.e., News and Prosiebensat go up and down completely randomly.

Pair Corralation between News and Prosiebensat

Assuming the 90 days horizon News Corporation is expected to generate 0.52 times more return on investment than Prosiebensat. However, News Corporation is 1.93 times less risky than Prosiebensat. It trades about 0.19 of its potential returns per unit of risk. Prosiebensat 1 Media is currently generating about 0.04 per unit of risk. If you would invest  2,340  in News Corporation on September 12, 2024 and sell it today you would earn a total of  400.00  from holding News Corporation or generate 17.09% return on investment over 90 days.

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

News Corp.  vs.  Prosiebensat 1 Media

News

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in News Corporation are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, News reported solid returns over the last few months and may actually be approaching a breakup point.

Prosiebensat 1 Media

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prosiebensat 1 Media are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Prosiebensat may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with News and Prosiebensat

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

The idea behind News Corporation and Prosiebensat 1 Media 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.