Correlation Between PM Capital and ARN Media

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

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

Diversification Opportunities for PM Capital and ARN Media

0.8

Correlation Coefficient

PM Capital  ARN Media

Very poor diversification

The 3 months correlation between PGF and ARN is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding PM Capital Global 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 PM Capital 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 PM Capital Global 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 PM Capital i.e., PM Capital and ARN Media go up and down completely randomly.

Pair Corralation between PM Capital and ARN Media

Assuming the 90 days trading horizon PM Capital is expected to generate 3.98 times less return on investment than ARN Media. But when comparing it to its historical volatility, PM Capital Global is 2.85 times less risky than ARN Media. It trades about 0.1 of its potential returns per unit of risk. ARN Media Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  56.00  in ARN Media Limited on September 5, 2024 and sell it today you would earn a total of  14.00  from holding ARN Media Limited or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

PM Capital Global  vs.  ARN Media Limited

PM Capital Global

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PM Capital Global are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, PM Capital 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

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ARN Media Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ARN Media unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PM Capital and ARN Media

The main advantage of trading using opposite PM Capital and ARN Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PM Capital 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 PM Capital Global 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..