Correlation Between New Generation and Icon Media

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

By analyzing existing cross correlation between New Generation Consumer and Icon Media Holdings, you can compare the effects of market volatilities on New Generation and Icon Media 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 New Generation with a short position of Icon Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Generation and Icon Media.

Diversification Opportunities for New Generation and Icon Media

0.11

Correlation Coefficient

New Generation  Icon Media

Average diversification

The 3 months correlation between New and Icon is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding New Generation Consumer and Icon Media Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Media Holdings and New Generation 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 New Generation Consumer are associated (or correlated) with Icon Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Media Holdings has no effect on the direction of New Generation i.e., New Generation and Icon Media go up and down completely randomly.

Pair Corralation between New Generation and Icon Media

Given the investment horizon of 90 days New Generation is expected to generate 1.21 times less return on investment than Icon Media. In addition to that, New Generation is 1.04 times more volatile than Icon Media Holdings. It trades about 0.06 of its total potential returns per unit of risk. Icon Media Holdings is currently generating about 0.07 per unit of volatility. If you would invest  0.03  in Icon Media Holdings on September 18, 2024 and sell it today you would earn a total of  0.00  from holding Icon Media Holdings or generate 0.0% return on investment over 90 days.

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

New Generation Consumer  vs.  Icon Media Holdings

New Generation Consumer

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New Generation Consumer are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal fundamental indicators, New Generation reported solid returns over the last few months and may actually be approaching a breakup point.

Icon Media Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Media Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Icon Media displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Generation and Icon Media

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

The idea behind New Generation Consumer and Icon Media Holdings 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.