Correlation Between Nexstar Broadcasting and Lions Gate

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

By analyzing existing cross correlation between Nexstar Broadcasting Group and Lions Gate Entertainment, you can compare the effects of market volatilities on Nexstar Broadcasting and Lions Gate 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 Nexstar Broadcasting with a short position of Lions Gate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexstar Broadcasting and Lions Gate.

Diversification Opportunities for Nexstar Broadcasting and Lions Gate

0.27

Correlation Coefficient

Nexstar Broadcasting  Lions Gate

Modest diversification

The 3 months correlation between Nexstar and Lions is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Nexstar Broadcasting Group and Lions Gate Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lions Gate Entertainment and Nexstar Broadcasting 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 Nexstar Broadcasting Group are associated (or correlated) with Lions Gate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lions Gate Entertainment has no effect on the direction of Nexstar Broadcasting i.e., Nexstar Broadcasting and Lions Gate go up and down completely randomly.

Pair Corralation between Nexstar Broadcasting and Lions Gate

Given the investment horizon of 90 days Nexstar Broadcasting Group is expected to under-perform the Lions Gate. But the stock apears to be less risky and, when comparing its historical volatility, Nexstar Broadcasting Group is 1.17 times less risky than Lions Gate. The stock trades about -0.01 of its potential returns per unit of risk. The Lions Gate Entertainment is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  761.00  in Lions Gate Entertainment on September 22, 2024 and sell it today you would earn a total of  38.00  from holding Lions Gate Entertainment or generate 4.99% return on investment over 90 days.

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

Nexstar Broadcasting Group  vs.  Lions Gate Entertainment

Nexstar Broadcasting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nexstar Broadcasting Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nexstar Broadcasting is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Lions Gate Entertainment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lions Gate Entertainment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lions Gate may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nexstar Broadcasting and Lions Gate

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

The idea behind Nexstar Broadcasting Group and Lions Gate Entertainment 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.