Correlation Between ARN Media and Sky Metals

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

Diversification Opportunities for ARN Media and Sky Metals

0.54

Correlation Coefficient

ARN Media  Sky Metals

Very weak diversification

The 3 months correlation between ARN and Sky is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding ARN Media Limited and Sky Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sky Metals 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 Sky Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sky Metals has no effect on the direction of ARN Media i.e., ARN Media and Sky Metals go up and down completely randomly.

Pair Corralation between ARN Media and Sky Metals

Assuming the 90 days trading horizon ARN Media Limited is expected to under-perform the Sky Metals. But the stock apears to be less risky and, when comparing its historical volatility, ARN Media Limited is 1.24 times less risky than Sky Metals. The stock trades about -0.1 of its potential returns per unit of risk. The Sky Metals is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  5.20  in Sky Metals on December 27, 2024 and sell it today you would lose (0.50) from holding Sky Metals or give up 9.62% of portfolio value over 90 days.

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

ARN Media Limited  vs.  Sky Metals

ARN Media Limited

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sky Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sky Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with ARN Media and Sky Metals

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

The idea behind ARN Media Limited and Sky Metals 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.