Correlation Between Media and Arion Banki

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

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

Diversification Opportunities for Media and Arion Banki

-0.55

Correlation Coefficient

Media  Arion Banki

Excellent diversification

The 3 months correlation between Media and Arion is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Media and Games and Arion banki hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arion banki hf and 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 Media and Games are associated (or correlated) with Arion Banki. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arion banki hf has no effect on the direction of Media i.e., Media and Arion Banki go up and down completely randomly.

Pair Corralation between Media and Arion Banki

Assuming the 90 days trading horizon Media is expected to generate 1.15 times less return on investment than Arion Banki. In addition to that, Media is 2.55 times more volatile than Arion banki hf. It trades about 0.01 of its total potential returns per unit of risk. Arion banki hf is currently generating about 0.03 per unit of volatility. If you would invest  1,260  in Arion banki hf on December 4, 2024 and sell it today you would earn a total of  30.00  from holding Arion banki hf or generate 2.38% return on investment over 90 days.

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

Media and Games  vs.  Arion banki hf

Media and Games

Risk-Adjusted Performance

Very Weak

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

Arion banki hf

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arion banki hf are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Arion Banki is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Media and Arion Banki

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

The idea behind Media and Games and Arion banki hf 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.