Correlation Between ARN Media and Farm Pride

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

By analyzing existing cross correlation between ARN Media Limited and Farm Pride Foods, you can compare the effects of market volatilities on ARN Media and Farm Pride 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 ARN Media with a short position of Farm Pride. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARN Media and Farm Pride.

Diversification Opportunities for ARN Media and Farm Pride

0.19

Correlation Coefficient

ARN Media  Farm Pride

Average diversification

The 3 months correlation between ARN and Farm is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding ARN Media Limited and Farm Pride Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farm Pride Foods and ARN Media 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 ARN Media Limited are associated (or correlated) with Farm Pride. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farm Pride Foods has no effect on the direction of ARN Media i.e., ARN Media and Farm Pride go up and down completely randomly.

Pair Corralation between ARN Media and Farm Pride

Assuming the 90 days trading horizon ARN Media Limited is expected to generate 0.57 times more return on investment than Farm Pride. However, ARN Media Limited is 1.75 times less risky than Farm Pride. It trades about 0.1 of its potential returns per unit of risk. Farm Pride Foods is currently generating about 0.02 per unit of risk. If you would invest  62.00  in ARN Media Limited on September 15, 2024 and sell it today you would earn a total of  11.00  from holding ARN Media Limited or generate 17.74% return on investment over 90 days.

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

ARN Media Limited  vs.  Farm Pride Foods

ARN Media Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ARN Media Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ARN Media unveiled solid returns over the last few months and may actually be approaching a breakup point.

Farm Pride Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Farm Pride Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Farm Pride may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ARN Media and Farm Pride

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

The idea behind ARN Media Limited and Farm Pride Foods 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.