Correlation Between Iron Road and Metro Mining
Can any of the company-specific risk be diversified away by investing in both Iron Road and Metro Mining 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 Metro Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iron Road and Metro Mining, you can compare the effects of market volatilities on Iron Road and Metro Mining 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 Metro Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Road and Metro Mining.
Diversification Opportunities for Iron Road and Metro Mining
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Iron and Metro is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and Metro Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro 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 Metro Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Mining has no effect on the direction of Iron Road i.e., Iron Road and Metro Mining go up and down completely randomly.
Pair Corralation between Iron Road and Metro Mining
Assuming the 90 days trading horizon Iron Road is expected to under-perform the Metro Mining. But the stock apears to be less risky and, when comparing its historical volatility, Iron Road is 1.24 times less risky than Metro Mining. The stock trades about -0.4 of its potential returns per unit of risk. The Metro Mining is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 6.00 in Metro Mining on October 29, 2024 and sell it today you would lose (0.20) from holding Metro Mining or give up 3.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iron Road vs. Metro Mining
Performance |
| Timeline |
| Iron Road |
| Metro Mining |
Iron Road and Metro Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iron Road and Metro Mining
The main advantage of trading using opposite Iron Road and Metro Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Road position performs unexpectedly, Metro Mining 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 Metro Mining will offset losses from the drop in Metro Mining's long position.| Iron Road vs. Hutchison Telecommunications | Iron Road vs. MetalsGrove Mining | Iron Road vs. Falcon Metals | Iron Road vs. Computershare |
| Metro Mining vs. Arc Funds | Metro Mining vs. Garda Diversified Ppty | Metro Mining vs. Viva Leisure | Metro Mining 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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