Correlation Between Ziff Davis and Marchex

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

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

Diversification Opportunities for Ziff Davis and Marchex

-0.37

Correlation Coefficient

Ziff Davis  Marchex

Very good diversification

The 3 months correlation between Ziff and Marchex is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ziff Davis and Marchex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marchex and Ziff Davis 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 Ziff Davis are associated (or correlated) with Marchex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marchex has no effect on the direction of Ziff Davis i.e., Ziff Davis and Marchex go up and down completely randomly.

Pair Corralation between Ziff Davis and Marchex

Allowing for the 90-day total investment horizon Ziff Davis is expected to generate 0.83 times more return on investment than Marchex. However, Ziff Davis is 1.21 times less risky than Marchex. It trades about 0.11 of its potential returns per unit of risk. Marchex is currently generating about -0.01 per unit of risk. If you would invest  4,887  in Ziff Davis on August 30, 2024 and sell it today you would earn a total of  884.00  from holding Ziff Davis or generate 18.09% return on investment over 90 days.

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

Ziff Davis  vs.  Marchex

Ziff Davis

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ziff Davis are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Ziff Davis exhibited solid returns over the last few months and may actually be approaching a breakup point.

Marchex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marchex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Marchex is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ziff Davis and Marchex

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

The idea behind Ziff Davis and Marchex 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.