Correlation Between Network Media and Caribbean Utilities

Can any of the company-specific risk be diversified away by investing in both Network Media and Caribbean Utilities 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 Caribbean Utilities 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 Caribbean Utilities, you can compare the effects of market volatilities on Network Media and Caribbean Utilities 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 Caribbean Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Network Media and Caribbean Utilities.

Diversification Opportunities for Network Media and Caribbean Utilities

0.6

Correlation Coefficient

Network Media  Caribbean Utilities

Poor diversification

The 3 months correlation between Network and Caribbean is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Network Media Group and Caribbean Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caribbean Utilities 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 Caribbean Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caribbean Utilities has no effect on the direction of Network Media i.e., Network Media and Caribbean Utilities go up and down completely randomly.

Pair Corralation between Network Media and Caribbean Utilities

Assuming the 90 days horizon Network Media Group is expected to under-perform the Caribbean Utilities. In addition to that, Network Media is 4.08 times more volatile than Caribbean Utilities. It trades about -0.25 of its total potential returns per unit of risk. Caribbean Utilities is currently generating about 0.02 per unit of volatility. If you would invest  1,381  in Caribbean Utilities on September 8, 2024 and sell it today you would earn a total of  18.00  from holding Caribbean Utilities or generate 1.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Network Media Group  vs.  Caribbean Utilities

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. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Caribbean Utilities

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Caribbean Utilities are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Caribbean Utilities is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Network Media and Caribbean Utilities

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

The idea behind Network Media Group and Caribbean Utilities 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.