Correlation Between ACDC Metals and Iron Road
Can any of the company-specific risk be diversified away by investing in both ACDC Metals 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 ACDC Metals and Iron Road into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ACDC Metals and Iron Road, you can compare the effects of market volatilities on ACDC Metals 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 ACDC Metals with a short position of Iron Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of ACDC Metals and Iron Road.
Diversification Opportunities for ACDC Metals and Iron Road
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ACDC and Iron is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding ACDC Metals and Iron Road in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron Road and ACDC Metals 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 ACDC Metals 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 ACDC Metals i.e., ACDC Metals and Iron Road go up and down completely randomly.
Pair Corralation between ACDC Metals and Iron Road
Assuming the 90 days trading horizon ACDC Metals is expected to under-perform the Iron Road. In addition to that, ACDC Metals is 1.98 times more volatile than Iron Road. It trades about -0.03 of its total potential returns per unit of risk. Iron Road is currently generating about -0.04 per unit of volatility. If you would invest 5.60 in Iron Road on October 20, 2024 and sell it today you would lose (0.10) from holding Iron Road or give up 1.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
ACDC Metals vs. Iron Road
Performance |
| Timeline |
| ACDC Metals |
| Iron Road |
ACDC Metals and Iron Road Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ACDC Metals and Iron Road
The main advantage of trading using opposite ACDC Metals and Iron Road positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ACDC Metals 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.| ACDC Metals vs. Hotel Property Investments | ACDC Metals vs. Mayfield Childcare | ACDC Metals vs. Australian Unity Office | ACDC Metals vs. Navigator Global Investments |
| Iron Road vs. Homeco Daily Needs | Iron Road vs. Sky Metals | Iron Road vs. ACDC Metals | Iron Road vs. Centrex Metals |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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