Correlation Between Adairs and ARN Media
Can any of the company-specific risk be diversified away by investing in both Adairs and ARN 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 Adairs and ARN Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adairs and ARN Media Limited, you can compare the effects of market volatilities on Adairs and ARN 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 Adairs with a short position of ARN Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adairs and ARN Media.
Diversification Opportunities for Adairs and ARN Media
Poor diversification
The 3 months correlation between Adairs and ARN is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Adairs and ARN Media Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARN Media Limited and Adairs 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 Adairs are associated (or correlated) with ARN Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARN Media Limited has no effect on the direction of Adairs i.e., Adairs and ARN Media go up and down completely randomly.
Pair Corralation between Adairs and ARN Media
Assuming the 90 days trading horizon Adairs is expected to under-perform the ARN Media. But the stock apears to be less risky and, when comparing its historical volatility, Adairs is 1.33 times less risky than ARN Media. The stock trades about -0.03 of its potential returns per unit of risk. The ARN Media Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 72.00 in ARN Media Limited on August 28, 2024 and sell it today you would lose (1.00) from holding ARN Media Limited or give up 1.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adairs vs. ARN Media Limited
Performance |
| Timeline |
| Adairs |
| ARN Media Limited |
Adairs and ARN Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adairs and ARN Media
The main advantage of trading using opposite Adairs and ARN Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adairs position performs unexpectedly, ARN 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 ARN Media will offset losses from the drop in ARN Media's long position.| Adairs vs. Jupiter Energy | Adairs vs. WA1 Resources | Adairs vs. Predictive Discovery | Adairs vs. Cooper Metals |
| ARN Media vs. M3 Mining | ARN Media vs. Oneview Healthcare PLC | ARN Media vs. Fisher Paykel Healthcare | ARN Media vs. Lendlease Group |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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