Correlation Between Iron Road and Austchina Holdings
Can any of the company-specific risk be diversified away by investing in both Iron Road and Austchina Holdings 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 Austchina Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iron Road and Austchina Holdings, you can compare the effects of market volatilities on Iron Road and Austchina Holdings 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 Austchina Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Road and Austchina Holdings.
Diversification Opportunities for Iron Road and Austchina Holdings
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Iron and Austchina is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and Austchina Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austchina Holdings 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 Austchina Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austchina Holdings has no effect on the direction of Iron Road i.e., Iron Road and Austchina Holdings go up and down completely randomly.
Pair Corralation between Iron Road and Austchina Holdings
Assuming the 90 days trading horizon Iron Road is expected to under-perform the Austchina Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Iron Road is 2.79 times less risky than Austchina Holdings. The stock trades about -0.03 of its potential returns per unit of risk. The Austchina Holdings is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 0.70 in Austchina Holdings on September 14, 2024 and sell it today you would lose (0.60) from holding Austchina Holdings or give up 85.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iron Road vs. Austchina Holdings
Performance |
| Timeline |
| Iron Road |
| Austchina Holdings |
Iron Road and Austchina Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iron Road and Austchina Holdings
The main advantage of trading using opposite Iron Road and Austchina Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Road position performs unexpectedly, Austchina Holdings 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 Austchina Holdings will offset losses from the drop in Austchina Holdings' long position.| Iron Road vs. Northern Star Resources | Iron Road vs. Evolution Mining | Iron Road vs. Bluescope Steel | Iron Road vs. Sandfire Resources NL |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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