Correlation Between Althea Group and Iron Road
Can any of the company-specific risk be diversified away by investing in both Althea Group 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 Althea Group and Iron Road into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Althea Group Holdings and Iron Road, you can compare the effects of market volatilities on Althea Group 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 Althea Group with a short position of Iron Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Althea Group and Iron Road.
Diversification Opportunities for Althea Group and Iron Road
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Althea and Iron is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Althea Group Holdings and Iron Road in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron Road and Althea Group 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 Althea Group Holdings 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 Althea Group i.e., Althea Group and Iron Road go up and down completely randomly.
Pair Corralation between Althea Group and Iron Road
Assuming the 90 days trading horizon Althea Group Holdings is expected to generate 2.05 times more return on investment than Iron Road. However, Althea Group is 2.05 times more volatile than Iron Road. It trades about 0.09 of its potential returns per unit of risk. Iron Road is currently generating about -0.08 per unit of risk. If you would invest 2.10 in Althea Group Holdings on September 12, 2024 and sell it today you would earn a total of 1.30 from holding Althea Group Holdings or generate 61.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Althea Group Holdings vs. Iron Road
Performance |
| Timeline |
| Althea Group Holdings |
| Iron Road |
Althea Group and Iron Road Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Althea Group and Iron Road
The main advantage of trading using opposite Althea Group and Iron Road positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Althea Group 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.| Althea Group vs. Group 6 Metals | Althea Group vs. Event Hospitality and | Althea Group vs. Patriot Battery Metals | Althea Group vs. Embark Education Group |
| 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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