Correlation Between ARN Media and Woolworths

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

Diversification Opportunities for ARN Media and Woolworths

0.22

Correlation Coefficient

ARN Media  Woolworths

Modest diversification

The 3 months correlation between ARN and Woolworths is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding ARN Media Limited and Woolworths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths 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 Woolworths. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths has no effect on the direction of ARN Media i.e., ARN Media and Woolworths go up and down completely randomly.

Pair Corralation between ARN Media and Woolworths

Assuming the 90 days trading horizon ARN Media Limited is expected to generate 6.5 times more return on investment than Woolworths. However, ARN Media is 6.5 times more volatile than Woolworths. It trades about 0.06 of its potential returns per unit of risk. Woolworths is currently generating about 0.25 per unit of risk. If you would invest  71.00  in ARN Media Limited on October 7, 2024 and sell it today you would earn a total of  2.00  from holding ARN Media Limited or generate 2.82% return on investment over 90 days.

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

ARN Media Limited  vs.  Woolworths

ARN Media Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ARN Media Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Woolworths

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woolworths 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 Woolworths

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

The idea behind ARN Media Limited and Woolworths 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..