Correlation Between Era Media and Arkadia Digital

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

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

Diversification Opportunities for Era Media and Arkadia Digital

0.23

Correlation Coefficient

Era Media  Arkadia Digital

Modest diversification

The 3 months correlation between Era and Arkadia is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Era Media Sejahtera and Arkadia Digital Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arkadia Digital Media and Era 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 Era Media Sejahtera are associated (or correlated) with Arkadia Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arkadia Digital Media has no effect on the direction of Era Media i.e., Era Media and Arkadia Digital go up and down completely randomly.

Pair Corralation between Era Media and Arkadia Digital

Assuming the 90 days trading horizon Era Media Sejahtera is expected to under-perform the Arkadia Digital. But the stock apears to be less risky and, when comparing its historical volatility, Era Media Sejahtera is 2.01 times less risky than Arkadia Digital. The stock trades about -0.01 of its potential returns per unit of risk. The Arkadia Digital Media is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,500  in Arkadia Digital Media on October 9, 2024 and sell it today you would earn a total of  0.00  from holding Arkadia Digital Media or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.37%
Values	Daily Returns

Era Media Sejahtera  vs.  Arkadia Digital Media

Era Media Sejahtera

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Era Media Sejahtera has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Era Media is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Arkadia Digital Media

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arkadia Digital Media are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Arkadia Digital is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Era Media and Arkadia Digital

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

The idea behind Era Media Sejahtera and Arkadia Digital Media 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.