Correlation Between Advanced Braking and Iron Road
Can any of the company-specific risk be diversified away by investing in both Advanced Braking and Iron Road 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 Advanced Braking and Iron Road into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Braking Technology and Iron Road, you can compare the effects of market volatilities on Advanced Braking and Iron Road 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 Advanced Braking with a short position of Iron Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Braking and Iron Road.
Diversification Opportunities for Advanced Braking and Iron Road
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Advanced and Iron is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Braking Technology and Iron Road in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron Road and Advanced Braking 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 Advanced Braking Technology are associated (or correlated) with Iron Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron Road has no effect on the direction of Advanced Braking i.e., Advanced Braking and Iron Road go up and down completely randomly.
Pair Corralation between Advanced Braking and Iron Road
Assuming the 90 days trading horizon Advanced Braking Technology is expected to generate 0.93 times more return on investment than Iron Road. However, Advanced Braking Technology is 1.07 times less risky than Iron Road. It trades about 0.15 of its potential returns per unit of risk. Iron Road is currently generating about -0.06 per unit of risk. If you would invest 5.10 in Advanced Braking Technology on September 1, 2024 and sell it today you would earn a total of 3.00 from holding Advanced Braking Technology or generate 58.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advanced Braking Technology vs. Iron Road
Performance |
| Timeline |
| Advanced Braking Tec |
| Iron Road |
Advanced Braking and Iron Road Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Braking and Iron Road
The main advantage of trading using opposite Advanced Braking and Iron Road positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Braking position performs unexpectedly, Iron Road 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 Iron Road will offset losses from the drop in Iron Road's long position.| Advanced Braking vs. Encounter Resources | Advanced Braking vs. Tlou Energy | Advanced Braking vs. Southern Cross Gold | Advanced Braking vs. Minbos Resources |
| Iron Road vs. Northern Star Resources | Iron Road vs. Evolution Mining | Iron Road vs. Bluescope Steel | Iron Road vs. Sandfire Resources NL |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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