Correlation Between Iron Road and SOCO
Can any of the company-specific risk be diversified away by investing in both Iron Road and SOCO 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 SOCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iron Road and SOCO Corporation, you can compare the effects of market volatilities on Iron Road and SOCO 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 SOCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Road and SOCO.
Diversification Opportunities for Iron Road and SOCO
Very weak diversification
The 3 months correlation between Iron and SOCO is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and SOCO Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOCO 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 SOCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOCO has no effect on the direction of Iron Road i.e., Iron Road and SOCO go up and down completely randomly.
Pair Corralation between Iron Road and SOCO
Assuming the 90 days trading horizon Iron Road is expected to generate 0.64 times more return on investment than SOCO. However, Iron Road is 1.55 times less risky than SOCO. It trades about -0.02 of its potential returns per unit of risk. SOCO Corporation is currently generating about -0.02 per unit of risk. If you would invest 9.50 in Iron Road on August 30, 2024 and sell it today you would lose (3.50) from holding Iron Road or give up 36.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iron Road vs. SOCO Corp.
Performance |
| Timeline |
| Iron Road |
| SOCO |
Iron Road and SOCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iron Road and SOCO
The main advantage of trading using opposite Iron Road and SOCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Road position performs unexpectedly, SOCO 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 SOCO will offset losses from the drop in SOCO'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 |
| SOCO vs. Hotel Property Investments | SOCO vs. Ainsworth Game Technology | SOCO vs. BKI Investment | SOCO vs. Toys R Us |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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