Correlation Between ARN Media and Macquarie Bank
Can any of the company-specific risk be diversified away by investing in both ARN Media and Macquarie Bank 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 Macquarie Bank 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 Macquarie Bank Ltd, you can compare the effects of market volatilities on ARN Media and Macquarie Bank 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 Macquarie Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARN Media and Macquarie Bank.
Diversification Opportunities for ARN Media and Macquarie Bank
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ARN and Macquarie is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding ARN Media Limited and Macquarie Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Bank 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 Macquarie Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Bank has no effect on the direction of ARN Media i.e., ARN Media and Macquarie Bank go up and down completely randomly.
Pair Corralation between ARN Media and Macquarie Bank
Assuming the 90 days trading horizon ARN Media Limited is expected to generate 7.58 times more return on investment than Macquarie Bank. However, ARN Media is 7.58 times more volatile than Macquarie Bank Ltd. It trades about 0.03 of its potential returns per unit of risk. Macquarie Bank Ltd is currently generating about 0.05 per unit of risk. If you would invest 72.00 in ARN Media Limited on September 7, 2024 and sell it today you would earn a total of 1.00 from holding ARN Media Limited or generate 1.39% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
ARN Media Limited vs. Macquarie Bank Ltd
Performance |
Timeline |
ARN Media Limited |
Macquarie Bank |
ARN Media and Macquarie Bank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ARN Media and Macquarie Bank
The main advantage of trading using opposite ARN Media and Macquarie Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARN Media position performs unexpectedly, Macquarie Bank 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 Macquarie Bank will offset losses from the drop in Macquarie Bank's long position.ARN Media vs. National Australia Bank | ARN Media vs. National Australia Bank | ARN Media vs. Westpac Banking | ARN Media vs. National Australia Bank |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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