Correlation Between Australian Unity and ARN Media

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

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

Diversification Opportunities for Australian Unity and ARN Media

-0.45

Correlation Coefficient

Australian Unity  ARN Media

Very good diversification

The 3 months correlation between Australian and ARN is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Australian Unity Office 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 Australian Unity 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 Australian Unity Office 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 Australian Unity i.e., Australian Unity and ARN Media go up and down completely randomly.

Pair Corralation between Australian Unity and ARN Media

Assuming the 90 days trading horizon Australian Unity Office is expected to under-perform the ARN Media. But the stock apears to be less risky and, when comparing its historical volatility, Australian Unity Office is 2.97 times less risky than ARN Media. The stock trades about -0.13 of its potential returns per unit of risk. The ARN Media Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Australian Unity Office  vs.  ARN Media Limited

Australian Unity Office

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian Unity Office has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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.

Pair Trading with Australian Unity and ARN Media

The main advantage of trading using opposite Australian Unity and ARN Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Unity 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 Australian Unity Office 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .