Correlation Between Iron Road and ASX

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Can any of the company-specific risk be diversified away by investing in both Iron Road and ASX 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 ASX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iron Road and ASX, you can compare the effects of market volatilities on Iron Road and ASX 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 ASX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Road and ASX.

Diversification Opportunities for Iron Road and ASX

0.41
  Correlation Coefficient
 ASX

Very weak diversification

The 3 months correlation between Iron and ASX is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and ASX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASX 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 ASX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASX has no effect on the direction of Iron Road i.e., Iron Road and ASX go up and down completely randomly.

Pair Corralation between Iron Road and ASX

Assuming the 90 days trading horizon Iron Road is expected to under-perform the ASX. In addition to that, Iron Road is 1.37 times more volatile than ASX. It trades about -0.16 of its total potential returns per unit of risk. ASX is currently generating about -0.08 per unit of volatility. If you would invest  6,527  in ASX on November 3, 2024 and sell it today you would lose (179.00) from holding ASX or give up 2.74% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Iron Road  vs.  ASX

 Performance 
       Timeline  
Iron Road 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Iron Road has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
ASX 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ASX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ASX is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Iron Road and ASX Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Iron Road and ASX

The main advantage of trading using opposite Iron Road and ASX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Road position performs unexpectedly, ASX 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 ASX will offset losses from the drop in ASX's long position.
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The idea behind Iron Road and ASX pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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