Correlation Between Paramount Global and Saga Communications

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

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

Diversification Opportunities for Paramount Global and Saga Communications

0.61

Correlation Coefficient

Paramount Global  Saga Communications

Poor diversification

The 3 months correlation between Paramount and Saga is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Paramount Global Class and Saga Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saga Communications and Paramount Global 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 Paramount Global Class are associated (or correlated) with Saga Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saga Communications has no effect on the direction of Paramount Global i.e., Paramount Global and Saga Communications go up and down completely randomly.

Pair Corralation between Paramount Global and Saga Communications

Assuming the 90 days horizon Paramount Global Class is expected to generate 0.34 times more return on investment than Saga Communications. However, Paramount Global Class is 2.98 times less risky than Saga Communications. It trades about 0.08 of its potential returns per unit of risk. Saga Communications is currently generating about -0.17 per unit of risk. If you would invest  2,185  in Paramount Global Class on August 13, 2024 and sell it today you would earn a total of  20.00  from holding Paramount Global Class or generate 0.92% return on investment over 90 days.

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

Paramount Global Class  vs.  Saga Communications

Paramount Global Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paramount Global Class has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Paramount Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Paramount Global and Saga Communications

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

The idea behind Paramount Global Class and Saga Communications 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.