Correlation Between Iron Road and Australian Foundation
Can any of the company-specific risk be diversified away by investing in both Iron Road and Australian Foundation 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 Iron Road and Australian Foundation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iron Road and Australian Foundation Investment, you can compare the effects of market volatilities on Iron Road and Australian Foundation 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 Iron Road with a short position of Australian Foundation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Road and Australian Foundation.
Diversification Opportunities for Iron Road and Australian Foundation
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Iron and Australian is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and Australian Foundation Investme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Foundation and Iron Road 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 Iron Road are associated (or correlated) with Australian Foundation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Foundation has no effect on the direction of Iron Road i.e., Iron Road and Australian Foundation go up and down completely randomly.
Pair Corralation between Iron Road and Australian Foundation
Assuming the 90 days trading horizon Iron Road is expected to under-perform the Australian Foundation. In addition to that, Iron Road is 8.98 times more volatile than Australian Foundation Investment. It trades about -0.03 of its total potential returns per unit of risk. Australian Foundation Investment is currently generating about 0.09 per unit of volatility. If you would invest 738.00 in Australian Foundation Investment on September 2, 2024 and sell it today you would earn a total of 17.00 from holding Australian Foundation Investment or generate 2.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iron Road vs. Australian Foundation Investme
Performance |
| Timeline |
| Iron Road |
| Australian Foundation |
Iron Road and Australian Foundation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iron Road and Australian Foundation
The main advantage of trading using opposite Iron Road and Australian Foundation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Road position performs unexpectedly, Australian Foundation 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 Australian Foundation will offset losses from the drop in Australian Foundation's long position.| Iron Road vs. Northern Star Resources | Iron Road vs. Evolution Mining | Iron Road vs. Sandfire Resources NL | Iron Road vs. Aneka Tambang Tbk |
| Australian Foundation vs. Queste Communications | Australian Foundation vs. Ainsworth Game Technology | Australian Foundation vs. Ras Technology Holdings | Australian Foundation vs. Genetic Technologies |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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