Correlation Between Iron Road and GMO Internet
Can any of the company-specific risk be diversified away by investing in both Iron Road and GMO Internet 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 Iron Road and GMO Internet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iron Road Limited and GMO Internet, you can compare the effects of market volatilities on Iron Road and GMO Internet 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 Iron Road with a short position of GMO Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Road and GMO Internet.
Diversification Opportunities for Iron Road and GMO Internet
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Iron and GMO is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road Limited and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet and Iron Road 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 Iron Road Limited are associated (or correlated) with GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of Iron Road i.e., Iron Road and GMO Internet go up and down completely randomly.
Pair Corralation between Iron Road and GMO Internet
Assuming the 90 days horizon Iron Road Limited is expected to generate 2.27 times more return on investment than GMO Internet. However, Iron Road is 2.27 times more volatile than GMO Internet. It trades about 0.06 of its potential returns per unit of risk. GMO Internet is currently generating about 0.07 per unit of risk. If you would invest 4.55 in Iron Road Limited on October 11, 2024 and sell it today you would lose (2.30) from holding Iron Road Limited or give up 50.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Iron Road Limited vs. GMO Internet
Performance |
| Timeline |
| Iron Road Limited |
| GMO Internet |
Iron Road and GMO Internet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iron Road and GMO Internet
The main advantage of trading using opposite Iron Road and GMO Internet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Road position performs unexpectedly, GMO Internet 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 GMO Internet will offset losses from the drop in GMO Internet's long position.| Iron Road vs. Insurance Australia Group | Iron Road vs. QBE Insurance Group | Iron Road vs. Sekisui Chemical Co | Iron Road vs. China BlueChemical |
| GMO Internet vs. SIERRA METALS | GMO Internet vs. Easy Software AG | GMO Internet vs. Axway Software SA | GMO Internet vs. Forsys Metals Corp |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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