Correlation Between Metrics Master and Red Hill
Can any of the company-specific risk be diversified away by investing in both Metrics Master and Red Hill 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 Metrics Master and Red Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metrics Master Income and Red Hill Iron, you can compare the effects of market volatilities on Metrics Master and Red Hill 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 Metrics Master with a short position of Red Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metrics Master and Red Hill.
Diversification Opportunities for Metrics Master and Red Hill
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Metrics and Red is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Metrics Master Income and Red Hill Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Hill Iron and Metrics Master 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 Metrics Master Income are associated (or correlated) with Red Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Hill Iron has no effect on the direction of Metrics Master i.e., Metrics Master and Red Hill go up and down completely randomly.
Pair Corralation between Metrics Master and Red Hill
Assuming the 90 days trading horizon Metrics Master is expected to generate 7.96 times less return on investment than Red Hill. But when comparing it to its historical volatility, Metrics Master Income is 5.81 times less risky than Red Hill. It trades about 0.15 of its potential returns per unit of risk. Red Hill Iron is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 395.00 in Red Hill Iron on August 29, 2024 and sell it today you would earn a total of 46.00 from holding Red Hill Iron or generate 11.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metrics Master Income vs. Red Hill Iron
Performance |
| Timeline |
| Metrics Master Income |
| Red Hill Iron |
Metrics Master and Red Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metrics Master and Red Hill
The main advantage of trading using opposite Metrics Master and Red Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metrics Master position performs unexpectedly, Red Hill 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 Red Hill will offset losses from the drop in Red Hill's long position.| Metrics Master vs. Red Hill Iron | Metrics Master vs. Mount Gibson Iron | Metrics Master vs. MotorCycle Holdings | Metrics Master vs. Regal Investment |
| Red Hill vs. Northern Star Resources | Red Hill vs. Evolution Mining | Red Hill vs. Bluescope Steel | Red Hill vs. Sandfire Resources NL |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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