Correlation Between ARN Media and Sandfire Resources

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

Diversification Opportunities for ARN Media and Sandfire Resources

0.67

Correlation Coefficient

ARN Media  Sandfire Resources

Poor diversification

The 3 months correlation between ARN and Sandfire is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding ARN Media Limited and Sandfire Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources 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 Sandfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandfire Resources has no effect on the direction of ARN Media i.e., ARN Media and Sandfire Resources go up and down completely randomly.

Pair Corralation between ARN Media and Sandfire Resources

Assuming the 90 days trading horizon ARN Media Limited is expected to generate 1.46 times more return on investment than Sandfire Resources. However, ARN Media is 1.46 times more volatile than Sandfire Resources NL. It trades about 0.1 of its potential returns per unit of risk. Sandfire Resources NL is currently generating about 0.11 per unit of risk. If you would invest  62.00  in ARN Media Limited on September 17, 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	Significant
Accuracy	100.0%
Values	Daily Returns

ARN Media Limited  vs.  Sandfire Resources NL

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.

Sandfire Resources

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with ARN Media and Sandfire Resources

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

The idea behind ARN Media Limited and Sandfire Resources NL 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.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.