Correlation Between Aeris Environmental and ARN Media
Can any of the company-specific risk be diversified away by investing in both Aeris Environmental 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 Aeris Environmental and ARN Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aeris Environmental and ARN Media Limited, you can compare the effects of market volatilities on Aeris Environmental 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 Aeris Environmental with a short position of ARN Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeris Environmental and ARN Media.
Diversification Opportunities for Aeris Environmental and ARN Media
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aeris and ARN is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Aeris Environmental 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 Aeris Environmental 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 Aeris Environmental 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 Aeris Environmental i.e., Aeris Environmental and ARN Media go up and down completely randomly.
Pair Corralation between Aeris Environmental and ARN Media
Assuming the 90 days trading horizon Aeris Environmental is expected to generate 1.42 times more return on investment than ARN Media. However, Aeris Environmental is 1.42 times more volatile than ARN Media Limited. It trades about 0.1 of its potential returns per unit of risk. ARN Media Limited is currently generating about -0.01 per unit of risk. If you would invest 2.60 in Aeris Environmental on September 1, 2024 and sell it today you would earn a total of 6.40 from holding Aeris Environmental or generate 246.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aeris Environmental vs. ARN Media Limited
Performance |
| Timeline |
| Aeris Environmental |
| ARN Media Limited |
Aeris Environmental and ARN Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aeris Environmental and ARN Media
The main advantage of trading using opposite Aeris Environmental and ARN Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeris Environmental 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.| Aeris Environmental vs. Healthco Healthcare and | Aeris Environmental vs. Health and Plant | Aeris Environmental vs. Charter Hall Retail | Aeris Environmental vs. Retail Food Group |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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