Correlation Between ARN Media and Evolution Mining

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

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

Diversification Opportunities for ARN Media and Evolution Mining

0.82

Correlation Coefficient

ARN Media  Evolution Mining

Very poor diversification

The 3 months correlation between ARN and Evolution is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding ARN Media Limited and Evolution Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Mining and ARN 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 ARN Media Limited are associated (or correlated) with Evolution Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Mining has no effect on the direction of ARN Media i.e., ARN Media and Evolution Mining go up and down completely randomly.

Pair Corralation between ARN Media and Evolution Mining

Assuming the 90 days trading horizon ARN Media Limited is expected to generate 1.16 times more return on investment than Evolution Mining. However, ARN Media is 1.16 times more volatile than Evolution Mining. It trades about 0.15 of its potential returns per unit of risk. Evolution Mining is currently generating about 0.15 per unit of risk. If you would invest  57.00  in ARN Media Limited on September 4, 2024 and sell it today you would earn a total of  15.00  from holding ARN Media Limited or generate 26.32% return on investment over 90 days.

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

ARN Media Limited  vs.  Evolution Mining

ARN Media Limited

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ARN Media Limited are ranked lower than 11 (%) 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.

Evolution Mining

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Mining are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Evolution Mining unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ARN Media and Evolution Mining

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

The idea behind ARN Media Limited and Evolution Mining 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.