Correlation Between Arion Banki and Modern Times

Can any of the company-specific risk be diversified away by investing in both Arion Banki and Modern Times 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 Arion Banki and Modern Times into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arion banki hf and Modern Times Group, you can compare the effects of market volatilities on Arion Banki and Modern Times 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 Arion Banki with a short position of Modern Times. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arion Banki and Modern Times.

Diversification Opportunities for Arion Banki and Modern Times

0.69

Correlation Coefficient

Arion Banki  Modern Times

Poor diversification

The 3 months correlation between Arion and Modern is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Arion banki hf and Modern Times Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modern Times Group and Arion Banki 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 Arion banki hf are associated (or correlated) with Modern Times. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modern Times Group has no effect on the direction of Arion Banki i.e., Arion Banki and Modern Times go up and down completely randomly.

Pair Corralation between Arion Banki and Modern Times

Assuming the 90 days trading horizon Arion banki hf is expected to generate 1.23 times more return on investment than Modern Times. However, Arion Banki is 1.23 times more volatile than Modern Times Group. It trades about 0.33 of its potential returns per unit of risk. Modern Times Group is currently generating about 0.16 per unit of risk. If you would invest  1,200  in Arion banki hf on September 23, 2024 and sell it today you would earn a total of  125.00  from holding Arion banki hf or generate 10.42% return on investment over 90 days.

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

Arion banki hf  vs.  Modern Times Group

Arion banki hf

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arion banki hf are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Arion Banki unveiled solid returns over the last few months and may actually be approaching a breakup point.

Modern Times Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Modern Times Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Modern Times unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arion Banki and Modern Times

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

The idea behind Arion banki hf and Modern Times Group 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.