Correlation Between Marchex and Mirriad Advertising

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

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

Diversification Opportunities for Marchex and Mirriad Advertising

0.23

Correlation Coefficient

Marchex  Mirriad Advertising

Modest diversification

The 3 months correlation between Marchex and Mirriad is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Marchex and Mirriad Advertising plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mirriad Advertising plc and Marchex 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 Marchex are associated (or correlated) with Mirriad Advertising. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mirriad Advertising plc has no effect on the direction of Marchex i.e., Marchex and Mirriad Advertising go up and down completely randomly.

Pair Corralation between Marchex and Mirriad Advertising

Given the investment horizon of 90 days Marchex is expected to generate 20.68 times less return on investment than Mirriad Advertising. But when comparing it to its historical volatility, Marchex is 2.56 times less risky than Mirriad Advertising. It trades about 0.01 of its potential returns per unit of risk. Mirriad Advertising plc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2.25  in Mirriad Advertising plc on February 2, 2024 and sell it today you would earn a total of  0.75  from holding Mirriad Advertising plc or generate 33.33% return on investment over 90 days.

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

Marchex  vs.  Mirriad Advertising plc

Marchex

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marchex are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, Marchex is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Mirriad Advertising plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mirriad Advertising plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Mirriad Advertising reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marchex and Mirriad Advertising

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

The idea behind Marchex and Mirriad Advertising plc 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.