Correlation Between News and Nexstar Media

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

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

Diversification Opportunities for News and Nexstar Media

0.65

Correlation Coefficient

News  Nexstar Media

Poor diversification

The 3 months correlation between News and Nexstar is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding News Corp. and Nexstar Media Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexstar Media Group and News 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 News Corporation are associated (or correlated) with Nexstar Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexstar Media Group has no effect on the direction of News i.e., News and Nexstar Media go up and down completely randomly.

Pair Corralation between News and Nexstar Media

Assuming the 90 days trading horizon News Corporation is expected to generate 0.75 times more return on investment than Nexstar Media. However, News Corporation is 1.33 times less risky than Nexstar Media. It trades about 0.23 of its potential returns per unit of risk. Nexstar Media Group is currently generating about -0.03 per unit of risk. If you would invest  2,540  in News Corporation on September 26, 2024 and sell it today you would earn a total of  360.00  from holding News Corporation or generate 14.17% return on investment over 90 days.

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

News Corp.  vs.  Nexstar Media Group

News

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in News Corporation are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, News reported solid returns over the last few months and may actually be approaching a breakup point.

Nexstar Media Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nexstar Media Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Nexstar 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 News and Nexstar Media

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

The idea behind News Corporation and Nexstar 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.