Correlation Between Seven West and Beijing Media

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

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

Diversification Opportunities for Seven West and Beijing Media

0.16

Correlation Coefficient

Seven West  Beijing Media

Average diversification

The 3 months correlation between Seven and Beijing is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Seven West Media and Beijing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Media and Seven West 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 Seven West Media are associated (or correlated) with Beijing Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Media has no effect on the direction of Seven West i.e., Seven West and Beijing Media go up and down completely randomly.

Pair Corralation between Seven West and Beijing Media

Assuming the 90 days horizon Seven West Media is expected to generate 0.57 times more return on investment than Beijing Media. However, Seven West Media is 1.75 times less risky than Beijing Media. It trades about -0.15 of its potential returns per unit of risk. Beijing Media is currently generating about -0.09 per unit of risk. If you would invest  9.25  in Seven West Media on September 4, 2024 and sell it today you would lose (0.95) from holding Seven West Media or give up 10.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Seven West Media  vs.  Beijing Media

Seven West Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seven West Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile 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.

Beijing Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijing Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Beijing Media is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Seven West and Beijing Media

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

The idea behind Seven West Media and Beijing Media 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.