Correlation Between Roku and Network Media

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

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

Diversification Opportunities for Roku and Network Media

-0.04

Correlation Coefficient

Roku  Network Media

Good diversification

The 3 months correlation between Roku and Network is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Roku Inc 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 Roku 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 Roku Inc 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 Roku i.e., Roku and Network Media go up and down completely randomly.

Pair Corralation between Roku and Network Media

Given the investment horizon of 90 days Roku Inc is expected to generate 0.55 times more return on investment than Network Media. However, Roku Inc is 1.82 times less risky than Network Media. It trades about 0.06 of its potential returns per unit of risk. Network Media Group is currently generating about -0.13 per unit of risk. If you would invest  7,380  in Roku Inc on September 21, 2024 and sell it today you would earn a total of  680.50  from holding Roku Inc or generate 9.22% return on investment over 90 days.

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

Roku Inc  vs.  Network Media Group

Roku Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Roku Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, Roku unveiled solid returns over the last few months and may actually be approaching a breakup point.

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. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Roku and Network Media

The main advantage of trading using opposite Roku and Network Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roku 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.

The idea behind Roku Inc and Network Media Group 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.