Correlation Between Network Media and American Picture

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

By analyzing existing cross correlation between Network Media Group and American Picture House, you can compare the effects of market volatilities on Network Media and American Picture 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 Network Media with a short position of American Picture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Network Media and American Picture.

Diversification Opportunities for Network Media and American Picture

-0.44

Correlation Coefficient

Network Media  American Picture

Very good diversification

The 3 months correlation between Network and American is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Network Media Group and American Picture House in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Picture House and Network Media 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 Network Media Group are associated (or correlated) with American Picture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Picture House has no effect on the direction of Network Media i.e., Network Media and American Picture go up and down completely randomly.

Pair Corralation between Network Media and American Picture

Assuming the 90 days horizon Network Media Group is expected to under-perform the American Picture. In addition to that, Network Media is 1.48 times more volatile than American Picture House. It trades about -0.15 of its total potential returns per unit of risk. American Picture House is currently generating about 0.05 per unit of volatility. If you would invest  23.00  in American Picture House on August 31, 2024 and sell it today you would earn a total of  2.00  from holding American Picture House or generate 8.7% return on investment over 90 days.

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

Network Media Group  vs.  American Picture House

Network Media Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Network Media Group 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 December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

American Picture House

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Picture House are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical indicators, American Picture reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Network Media and American Picture

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

The idea behind Network Media Group and American Picture House 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.