Correlation Between Iron Road and Sky Metals
Can any of the company-specific risk be diversified away by investing in both Iron Road and Sky Metals 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 Sky Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iron Road and Sky Metals, you can compare the effects of market volatilities on Iron Road and Sky Metals 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 Sky Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Road and Sky Metals.
Diversification Opportunities for Iron Road and Sky Metals
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Iron and Sky is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and Sky Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sky Metals 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 Sky Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sky Metals has no effect on the direction of Iron Road i.e., Iron Road and Sky Metals go up and down completely randomly.
Pair Corralation between Iron Road and Sky Metals
Assuming the 90 days trading horizon Iron Road is expected to under-perform the Sky Metals. But the stock apears to be less risky and, when comparing its historical volatility, Iron Road is 1.5 times less risky than Sky Metals. The stock trades about -0.06 of its potential returns per unit of risk. The Sky Metals is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3.90 in Sky Metals on September 1, 2024 and sell it today you would earn a total of 1.20 from holding Sky Metals or generate 30.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iron Road vs. Sky Metals
Performance |
| Timeline |
| Iron Road |
| Sky Metals |
Iron Road and Sky Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iron Road and Sky Metals
The main advantage of trading using opposite Iron Road and Sky Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Road position performs unexpectedly, Sky Metals 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 Sky Metals will offset losses from the drop in Sky Metals' long position.| Iron Road vs. Northern Star Resources | Iron Road vs. Evolution Mining | Iron Road vs. Bluescope Steel | Iron Road vs. Sandfire Resources NL |
| Sky Metals vs. Carnegie Clean Energy | Sky Metals vs. Nufarm Finance NZ | Sky Metals vs. Richmond Vanadium Technology | Sky Metals 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |