Correlation Between Iron Road and Xero
Can any of the company-specific risk be diversified away by investing in both Iron Road and Xero 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 Xero into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iron Road and Xero, you can compare the effects of market volatilities on Iron Road and Xero 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 Xero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Road and Xero.
Diversification Opportunities for Iron Road and Xero
Excellent diversification
The 3 months correlation between Iron and Xero is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero 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 Xero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xero has no effect on the direction of Iron Road i.e., Iron Road and Xero go up and down completely randomly.
Pair Corralation between Iron Road and Xero
Assuming the 90 days trading horizon Iron Road is expected to under-perform the Xero. In addition to that, Iron Road is 1.26 times more volatile than Xero. It trades about -0.11 of its total potential returns per unit of risk. Xero is currently generating about 0.12 per unit of volatility. If you would invest 15,962 in Xero on October 11, 2024 and sell it today you would earn a total of 1,207 from holding Xero or generate 7.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.56% |
| Values | Daily Returns |
Iron Road vs. Xero
Performance |
| Timeline |
| Iron Road |
| Xero |
Iron Road and Xero Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iron Road and Xero
The main advantage of trading using opposite Iron Road and Xero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Road position performs unexpectedly, Xero 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 Xero will offset losses from the drop in Xero's long position.| Iron Road vs. Platinum Asset Management | Iron Road vs. Sky Metals | Iron Road vs. K2 Asset Management | Iron Road vs. Aussie Broadband |
| Xero vs. Magellan Financial Group | Xero vs. Bell Financial Group | Xero vs. Bluescope Steel | Xero vs. Kkr Credit Income |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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