Correlation Between Iron Road and Cochlear
Can any of the company-specific risk be diversified away by investing in both Iron Road and Cochlear 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 Cochlear into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iron Road and Cochlear, you can compare the effects of market volatilities on Iron Road and Cochlear 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 Cochlear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Road and Cochlear.
Diversification Opportunities for Iron Road and Cochlear
Excellent diversification
The 3 months correlation between Iron and Cochlear is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and Cochlear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cochlear 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 Cochlear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cochlear has no effect on the direction of Iron Road i.e., Iron Road and Cochlear go up and down completely randomly.
Pair Corralation between Iron Road and Cochlear
Assuming the 90 days trading horizon Iron Road is expected to under-perform the Cochlear. In addition to that, Iron Road is 2.74 times more volatile than Cochlear. It trades about -0.02 of its total potential returns per unit of risk. Cochlear is currently generating about 0.06 per unit of volatility. If you would invest 19,951 in Cochlear on September 12, 2024 and sell it today you would earn a total of 9,611 from holding Cochlear or generate 48.17% 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. Cochlear
Performance |
| Timeline |
| Iron Road |
| Cochlear |
Iron Road and Cochlear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iron Road and Cochlear
The main advantage of trading using opposite Iron Road and Cochlear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Road position performs unexpectedly, Cochlear 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 Cochlear will offset losses from the drop in Cochlear's long position.| Iron Road vs. Northern Star Resources | Iron Road vs. Evolution Mining | Iron Road vs. Bluescope Steel | Iron Road vs. Sandfire Resources NL |
| Cochlear vs. Queste Communications | Cochlear vs. Aussie Broadband | Cochlear vs. Gold Road Resources | Cochlear vs. Iron Road |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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