Correlation Between Saga Communications and Gray Television

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

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

Diversification Opportunities for Saga Communications and Gray Television

0.05

Correlation Coefficient

Saga Communications  Gray Television

Significant diversification

The 3 months correlation between Saga and Gray is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Saga Communications and Gray Television in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gray Television and Saga Communications 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 Saga Communications are associated (or correlated) with Gray Television. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gray Television has no effect on the direction of Saga Communications i.e., Saga Communications and Gray Television go up and down completely randomly.

Pair Corralation between Saga Communications and Gray Television

Considering the 90-day investment horizon Saga Communications is expected to under-perform the Gray Television. But the stock apears to be less risky and, when comparing its historical volatility, Saga Communications is 3.14 times less risky than Gray Television. The stock trades about -0.09 of its potential returns per unit of risk. The Gray Television is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  448.00  in Gray Television on July 9, 2024 and sell it today you would earn a total of  96.00  from holding Gray Television or generate 21.43% return on investment over 90 days.

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

Saga Communications  vs.  Gray Television

Saga Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Saga Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Gray Television

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gray Television are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Gray Television displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Saga Communications and Gray Television

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

The idea behind Saga Communications and Gray Television 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.