Correlation Between Falcon Metals and Red Hill
Can any of the company-specific risk be diversified away by investing in both Falcon Metals and Red Hill 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 Falcon Metals and Red Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Falcon Metals and Red Hill Iron, you can compare the effects of market volatilities on Falcon Metals and Red Hill 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 Falcon Metals with a short position of Red Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Metals and Red Hill.
Diversification Opportunities for Falcon Metals and Red Hill
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Falcon and Red is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Metals and Red Hill Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Hill Iron and Falcon 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 Falcon Metals are associated (or correlated) with Red Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Hill Iron has no effect on the direction of Falcon Metals i.e., Falcon Metals and Red Hill go up and down completely randomly.
Pair Corralation between Falcon Metals and Red Hill
Assuming the 90 days trading horizon Falcon Metals is expected to generate 3.18 times more return on investment than Red Hill. However, Falcon Metals is 3.18 times more volatile than Red Hill Iron. It trades about 0.2 of its potential returns per unit of risk. Red Hill Iron is currently generating about -0.03 per unit of risk. If you would invest 12.00 in Falcon Metals on November 1, 2024 and sell it today you would earn a total of 2.00 from holding Falcon Metals or generate 16.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Falcon Metals vs. Red Hill Iron
Performance |
| Timeline |
| Falcon Metals |
| Red Hill Iron |
Falcon Metals and Red Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Falcon Metals and Red Hill
The main advantage of trading using opposite Falcon Metals and Red Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcon Metals position performs unexpectedly, Red Hill 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 Red Hill will offset losses from the drop in Red Hill's long position.| Falcon Metals vs. Collins Foods | Falcon Metals vs. Global Health | Falcon Metals vs. Hutchison Telecommunications | Falcon Metals vs. Pure Foods Tasmania |
| Red Hill vs. Black Rock Mining | Red Hill vs. Aeon Metals | Red Hill vs. Pure Foods Tasmania | Red Hill vs. Autosports Group |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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