Correlation Between ARN Media and Embark Education

Can any of the company-specific risk be diversified away by investing in both ARN Media and Embark Education 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 Embark Education 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 Embark Education Group, you can compare the effects of market volatilities on ARN Media and Embark Education 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 Embark Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARN Media and Embark Education.

Diversification Opportunities for ARN Media and Embark Education

0.66

Correlation Coefficient

ARN Media  Embark Education

Poor diversification

The 3 months correlation between ARN and Embark is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding ARN Media Limited and Embark Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embark Education 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 Embark Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embark Education has no effect on the direction of ARN Media i.e., ARN Media and Embark Education go up and down completely randomly.

Pair Corralation between ARN Media and Embark Education

Assuming the 90 days trading horizon ARN Media Limited is expected to generate 1.73 times more return on investment than Embark Education. However, ARN Media is 1.73 times more volatile than Embark Education Group. It trades about 0.12 of its potential returns per unit of risk. Embark Education Group is currently generating about 0.11 per unit of risk. If you would invest  62.00  in ARN Media Limited on September 13, 2024 and sell it today you would earn a total of  13.00  from holding ARN Media Limited or generate 20.97% return on investment over 90 days.

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

ARN Media Limited  vs.  Embark Education Group

ARN Media Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ARN Media Limited are ranked lower than 9 (%) 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.

Embark Education

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embark Education Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Embark Education may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ARN Media and Embark Education

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

The idea behind ARN Media Limited and Embark Education Group 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.