Correlation Between Creative Media and Arad

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

By analyzing existing cross correlation between Creative Media Community and Arad, you can compare the effects of market volatilities on Creative Media and Arad 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 Creative Media with a short position of Arad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Creative Media and Arad.

Diversification Opportunities for Creative Media and Arad

0.37

Correlation Coefficient

Creative Media  Arad

Weak diversification

The 3 months correlation between Creative and Arad is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Creative Media Community and Arad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arad and Creative 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 Creative Media Community are associated (or correlated) with Arad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arad has no effect on the direction of Creative Media i.e., Creative Media and Arad go up and down completely randomly.

Pair Corralation between Creative Media and Arad

Assuming the 90 days trading horizon Creative Media Community is expected to generate 83.48 times more return on investment than Arad. However, Creative Media is 83.48 times more volatile than Arad. It trades about 0.12 of its potential returns per unit of risk. Arad is currently generating about 0.04 per unit of risk. If you would invest  6,170  in Creative Media Community on December 30, 2024 and sell it today you would earn a total of  1,880  from holding Creative Media Community or generate 30.47% return on investment over 90 days.

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

Creative Media Community  vs.  Arad

Creative Media Community

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Creative Media Community are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Creative Media sustained solid returns over the last few months and may actually be approaching a breakup point.

Arad

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arad are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Arad is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Creative Media and Arad

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

The idea behind Creative Media Community and Arad 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.