Correlation Between Iron Road and Alto Metals
Can any of the company-specific risk be diversified away by investing in both Iron Road and Alto Metals 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 Alto Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iron Road and Alto Metals, you can compare the effects of market volatilities on Iron Road and Alto Metals 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 Alto Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Road and Alto Metals.
Diversification Opportunities for Iron Road and Alto Metals
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Iron and Alto is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and Alto Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alto Metals 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 Alto Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alto Metals has no effect on the direction of Iron Road i.e., Iron Road and Alto Metals go up and down completely randomly.
Pair Corralation between Iron Road and Alto Metals
Assuming the 90 days trading horizon Iron Road is expected to under-perform the Alto Metals. But the stock apears to be less risky and, when comparing its historical volatility, Iron Road is 2.68 times less risky than Alto Metals. The stock trades about -0.06 of its potential returns per unit of risk. The Alto Metals is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3.70 in Alto Metals on September 1, 2024 and sell it today you would earn a total of 5.50 from holding Alto Metals or generate 148.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iron Road vs. Alto Metals
Performance |
| Timeline |
| Iron Road |
| Alto Metals |
Iron Road and Alto Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iron Road and Alto Metals
The main advantage of trading using opposite Iron Road and Alto Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Road position performs unexpectedly, Alto Metals 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 Alto Metals will offset losses from the drop in Alto Metals' long position.| Iron Road vs. Northern Star Resources | Iron Road vs. Evolution Mining | Iron Road vs. Bluescope Steel | Iron Road vs. Sandfire Resources NL |
| Alto Metals vs. Hotel Property Investments | Alto Metals vs. Alternative Investment Trust | Alto Metals vs. Argo Investments | Alto Metals vs. Macquarie Technology 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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