Correlation Between Postmedia Network and Network Media
Can any of the company-specific risk be diversified away by investing in both Postmedia Network and Network 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 Postmedia Network and Network Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Postmedia Network Canada and Network Media Group, you can compare the effects of market volatilities on Postmedia Network and Network 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 Postmedia Network with a short position of Network Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Postmedia Network and Network Media.
Diversification Opportunities for Postmedia Network and Network Media
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Postmedia and Network is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Postmedia Network Canada and Network Media Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Network Media Group and Postmedia Network 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 Postmedia Network Canada are associated (or correlated) with Network Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Network Media Group has no effect on the direction of Postmedia Network i.e., Postmedia Network and Network Media go up and down completely randomly.
Pair Corralation between Postmedia Network and Network Media
Assuming the 90 days trading horizon Postmedia Network Canada is expected to generate 0.64 times more return on investment than Network Media. However, Postmedia Network Canada is 1.56 times less risky than Network Media. It trades about -0.07 of its potential returns per unit of risk. Network Media Group is currently generating about -0.22 per unit of risk. If you would invest 145.00 in Postmedia Network Canada on September 6, 2024 and sell it today you would lose (20.00) from holding Postmedia Network Canada or give up 13.79% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Postmedia Network Canada vs. Network Media Group
Performance |
Timeline |
Postmedia Network Canada |
Network Media Group |
Postmedia Network and Network Media Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Postmedia Network and Network Media
The main advantage of trading using opposite Postmedia Network and Network Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Postmedia Network position performs unexpectedly, Network 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 Network Media will offset losses from the drop in Network Media's long position.Postmedia Network vs. Perseus Mining | Postmedia Network vs. Canso Credit Trust | Postmedia Network vs. National Bank of | Postmedia Network vs. Royal Bank of |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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