Correlation Between Hawsons Iron and ARN Media

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

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

Diversification Opportunities for Hawsons Iron and ARN Media

0.86

Correlation Coefficient

Hawsons Iron  ARN Media

Very poor diversification

The 3 months correlation between Hawsons and ARN is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Hawsons Iron and ARN Media Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARN Media Limited and Hawsons Iron 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 Hawsons Iron are associated (or correlated) with ARN Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARN Media Limited has no effect on the direction of Hawsons Iron i.e., Hawsons Iron and ARN Media go up and down completely randomly.

Pair Corralation between Hawsons Iron and ARN Media

Assuming the 90 days trading horizon Hawsons Iron is expected to generate 2.35 times more return on investment than ARN Media. However, Hawsons Iron is 2.35 times more volatile than ARN Media Limited. It trades about -0.01 of its potential returns per unit of risk. ARN Media Limited is currently generating about -0.08 per unit of risk. If you would invest  1.70  in Hawsons Iron on December 29, 2024 and sell it today you would lose (0.20) from holding Hawsons Iron or give up 11.76% of portfolio value over 90 days.

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

Hawsons Iron  vs.  ARN Media Limited

Hawsons Iron

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hawsons Iron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hawsons Iron is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 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 Hawsons Iron and ARN Media

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

The idea behind Hawsons Iron and ARN Media Limited 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.