Correlation Between Iron Road and Eagle Mountain
Can any of the company-specific risk be diversified away by investing in both Iron Road and Eagle Mountain 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 Eagle Mountain into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iron Road and Eagle Mountain Mining, you can compare the effects of market volatilities on Iron Road and Eagle Mountain 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 Eagle Mountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Road and Eagle Mountain.
Diversification Opportunities for Iron Road and Eagle Mountain
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Iron and Eagle is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and Eagle Mountain Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Mountain Mining 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 Eagle Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Mountain Mining has no effect on the direction of Iron Road i.e., Iron Road and Eagle Mountain go up and down completely randomly.
Pair Corralation between Iron Road and Eagle Mountain
Assuming the 90 days trading horizon Iron Road is expected to generate 0.7 times more return on investment than Eagle Mountain. However, Iron Road is 1.43 times less risky than Eagle Mountain. It trades about -0.09 of its potential returns per unit of risk. Eagle Mountain Mining is currently generating about -0.09 per unit of risk. If you would invest 6.50 in Iron Road on August 26, 2024 and sell it today you would lose (0.50) from holding Iron Road or give up 7.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iron Road vs. Eagle Mountain Mining
Performance |
| Timeline |
| Iron Road |
| Eagle Mountain Mining |
Iron Road and Eagle Mountain Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iron Road and Eagle Mountain
The main advantage of trading using opposite Iron Road and Eagle Mountain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Road position performs unexpectedly, Eagle Mountain 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 Eagle Mountain will offset losses from the drop in Eagle Mountain's long position.| Iron Road vs. Pinnacle Investment Management | Iron Road vs. Magellan Financial Group | Iron Road vs. National Australia Bank | Iron Road vs. Sky Metals |
| Eagle Mountain vs. Northern Star Resources | Eagle Mountain vs. Evolution Mining | Eagle Mountain vs. Bluescope Steel | Eagle Mountain vs. Sandfire Resources NL |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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