Correlation Between Hawsons Iron and Otto Energy
Can any of the company-specific risk be diversified away by investing in both Hawsons Iron and Otto Energy 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 Hawsons Iron and Otto Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hawsons Iron and Otto Energy, you can compare the effects of market volatilities on Hawsons Iron and Otto Energy 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 Hawsons Iron with a short position of Otto Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hawsons Iron and Otto Energy.
Diversification Opportunities for Hawsons Iron and Otto Energy
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hawsons and Otto is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Hawsons Iron and Otto Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otto Energy and Hawsons Iron 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 Hawsons Iron are associated (or correlated) with Otto Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otto Energy has no effect on the direction of Hawsons Iron i.e., Hawsons Iron and Otto Energy go up and down completely randomly.
Pair Corralation between Hawsons Iron and Otto Energy
Assuming the 90 days trading horizon Hawsons Iron is expected to under-perform the Otto Energy. But the stock apears to be less risky and, when comparing its historical volatility, Hawsons Iron is 1.28 times less risky than Otto Energy. The stock trades about -0.04 of its potential returns per unit of risk. The Otto Energy is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1.60 in Otto Energy on September 3, 2024 and sell it today you would lose (0.40) from holding Otto Energy or give up 25.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hawsons Iron vs. Otto Energy
Performance |
| Timeline |
| Hawsons Iron |
| Otto Energy |
Hawsons Iron and Otto Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hawsons Iron and Otto Energy
The main advantage of trading using opposite Hawsons Iron and Otto Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hawsons Iron position performs unexpectedly, Otto Energy 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 Otto Energy will offset losses from the drop in Otto Energy's long position.| Hawsons Iron vs. Northern Star Resources | Hawsons Iron vs. Evolution Mining | Hawsons Iron vs. Aneka Tambang Tbk |
| Otto Energy vs. Retail Food Group | Otto Energy vs. Viva Leisure | Otto Energy vs. oOhMedia | Otto Energy vs. Kneomedia |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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