Correlation Between Mount Gibson and Retail Food
Can any of the company-specific risk be diversified away by investing in both Mount Gibson and Retail Food 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 Mount Gibson and Retail Food into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mount Gibson Iron and Retail Food Group, you can compare the effects of market volatilities on Mount Gibson and Retail Food 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 Mount Gibson with a short position of Retail Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mount Gibson and Retail Food.
Diversification Opportunities for Mount Gibson and Retail Food
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Mount and Retail is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Mount Gibson Iron and Retail Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Food Group and Mount Gibson 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 Mount Gibson Iron are associated (or correlated) with Retail Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Food Group has no effect on the direction of Mount Gibson i.e., Mount Gibson and Retail Food go up and down completely randomly.
Pair Corralation between Mount Gibson and Retail Food
Assuming the 90 days trading horizon Mount Gibson Iron is expected to under-perform the Retail Food. But the stock apears to be less risky and, when comparing its historical volatility, Mount Gibson Iron is 1.18 times less risky than Retail Food. The stock trades about -0.13 of its potential returns per unit of risk. The Retail Food Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 6.70 in Retail Food Group on August 30, 2024 and sell it today you would earn a total of 0.60 from holding Retail Food Group or generate 8.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mount Gibson Iron vs. Retail Food Group
Performance |
| Timeline |
| Mount Gibson Iron |
| Retail Food Group |
Mount Gibson and Retail Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mount Gibson and Retail Food
The main advantage of trading using opposite Mount Gibson and Retail Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mount Gibson position performs unexpectedly, Retail Food 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 Retail Food will offset losses from the drop in Retail Food's long position.| Mount Gibson vs. Northern Star Resources | Mount Gibson vs. Evolution Mining | Mount Gibson vs. Bluescope Steel | Mount Gibson vs. Sandfire Resources NL |
| Retail Food vs. Autosports Group | Retail Food vs. AiMedia Technologies | Retail Food vs. BKI Investment | Retail Food vs. ARN Media Limited |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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