Correlation Between Wave Entertainment and Regional Container

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

By analyzing existing cross correlation between Wave Entertainment Public and Regional Container Lines, you can compare the effects of market volatilities on Wave Entertainment and Regional Container 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 Wave Entertainment with a short position of Regional Container. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wave Entertainment and Regional Container.

Diversification Opportunities for Wave Entertainment and Regional Container

0.58

Correlation Coefficient

Wave Entertainment  Regional Container

Very weak diversification

The 3 months correlation between Wave and Regional is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Wave Entertainment Public and Regional Container Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Container Lines and Wave Entertainment 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 Wave Entertainment Public are associated (or correlated) with Regional Container. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Container Lines has no effect on the direction of Wave Entertainment i.e., Wave Entertainment and Regional Container go up and down completely randomly.

Pair Corralation between Wave Entertainment and Regional Container

Assuming the 90 days trading horizon Wave Entertainment is expected to generate 20.27 times less return on investment than Regional Container. In addition to that, Wave Entertainment is 1.39 times more volatile than Regional Container Lines. It trades about 0.02 of its total potential returns per unit of risk. Regional Container Lines is currently generating about 0.46 per unit of volatility. If you would invest  1,720  in Regional Container Lines on February 6, 2024 and sell it today you would earn a total of  330.00  from holding Regional Container Lines or generate 19.19% return on investment over 90 days.

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

Wave Entertainment Public  vs.  Regional Container Lines

Wave Entertainment Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wave Entertainment Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Wave Entertainment is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Regional Container Lines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Regional Container Lines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Wave Entertainment and Regional Container

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

The idea behind Wave Entertainment Public and Regional Container Lines 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.