Correlation Between CSL and ARN Media

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

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

Diversification Opportunities for CSL and ARN Media

0.07

Correlation Coefficient

CSL  ARN Media

Significant diversification

The 3 months correlation between CSL and ARN is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding CSL 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 CSL 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 CSL 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 CSL i.e., CSL and ARN Media go up and down completely randomly.

Pair Corralation between CSL and ARN Media

Assuming the 90 days trading horizon CSL is expected to under-perform the ARN Media. But the stock apears to be less risky and, when comparing its historical volatility, CSL is 3.3 times less risky than ARN Media. The stock trades about -0.02 of its potential returns per unit of risk. The ARN Media Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  62.00  in ARN Media Limited on September 27, 2024 and sell it today you would earn a total of  10.00  from holding ARN Media Limited or generate 16.13% return on investment over 90 days.

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

CSL  vs.  ARN Media Limited

CSL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, CSL 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

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ARN Media Limited are ranked lower than 7 (%) 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 CSL and ARN Media

The main advantage of trading using opposite CSL and ARN Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSL 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 CSL 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.