Correlation Between ARN Media and New Hope

Can any of the company-specific risk be diversified away by investing in both ARN Media and New Hope 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 New Hope 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 New Hope, you can compare the effects of market volatilities on ARN Media and New Hope 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 New Hope. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARN Media and New Hope.

Diversification Opportunities for ARN Media and New Hope

0.3

Correlation Coefficient

ARN Media  New Hope

Weak diversification

The 3 months correlation between ARN and New is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding ARN Media Limited and New Hope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Hope 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 New Hope. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Hope has no effect on the direction of ARN Media i.e., ARN Media and New Hope go up and down completely randomly.

Pair Corralation between ARN Media and New Hope

Assuming the 90 days trading horizon ARN Media Limited is expected to under-perform the New Hope. In addition to that, ARN Media is 3.0 times more volatile than New Hope. It trades about -0.1 of its total potential returns per unit of risk. New Hope is currently generating about -0.18 per unit of volatility. If you would invest  503.00  in New Hope on October 11, 2024 and sell it today you would lose (19.00) from holding New Hope or give up 3.78% of portfolio value over 90 days.

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

ARN Media Limited  vs.  New Hope

ARN Media Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARN Media Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ARN Media is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

New Hope

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Hope has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, New Hope is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ARN Media and New Hope

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

The idea behind ARN Media Limited and New Hope 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.