Correlation Between Paradox Interactive and Media

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

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

Diversification Opportunities for Paradox Interactive and Media

0.26

Correlation Coefficient

Paradox Interactive  Media

Modest diversification

The 3 months correlation between Paradox and Media is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Paradox Interactive AB and Media and Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Media and Games and Paradox Interactive 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 Paradox Interactive AB are associated (or correlated) with Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Media and Games has no effect on the direction of Paradox Interactive i.e., Paradox Interactive and Media go up and down completely randomly.

Pair Corralation between Paradox Interactive and Media

Assuming the 90 days trading horizon Paradox Interactive AB is expected to generate 0.48 times more return on investment than Media. However, Paradox Interactive AB is 2.08 times less risky than Media. It trades about 0.23 of its potential returns per unit of risk. Media and Games is currently generating about 0.07 per unit of risk. If you would invest  15,800  in Paradox Interactive AB on September 12, 2024 and sell it today you would earn a total of  3,920  from holding Paradox Interactive AB or generate 24.81% return on investment over 90 days.

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

Paradox Interactive AB  vs.  Media and Games

Paradox Interactive

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Paradox Interactive AB are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Paradox Interactive unveiled solid returns over the last few months and may actually be approaching a breakup point.

Media and Games

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Media and Games are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Media unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paradox Interactive and Media

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

The idea behind Paradox Interactive AB and Media and Games 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.