Correlation Between Red Hill and ACDC Metals
Can any of the company-specific risk be diversified away by investing in both Red Hill and ACDC 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 Red Hill and ACDC Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Red Hill Iron and ACDC Metals, you can compare the effects of market volatilities on Red Hill and ACDC 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 Red Hill with a short position of ACDC Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Hill and ACDC Metals.
Diversification Opportunities for Red Hill and ACDC Metals
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Red and ACDC is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Red Hill Iron and ACDC Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACDC Metals and Red Hill 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 Red Hill Iron are associated (or correlated) with ACDC Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACDC Metals has no effect on the direction of Red Hill i.e., Red Hill and ACDC Metals go up and down completely randomly.
Pair Corralation between Red Hill and ACDC Metals
Assuming the 90 days trading horizon Red Hill Iron is expected to generate 0.64 times more return on investment than ACDC Metals. However, Red Hill Iron is 1.57 times less risky than ACDC Metals. It trades about 0.04 of its potential returns per unit of risk. ACDC Metals is currently generating about 0.0 per unit of risk. If you would invest 365.00 in Red Hill Iron on August 25, 2024 and sell it today you would earn a total of 70.00 from holding Red Hill Iron or generate 19.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Red Hill Iron vs. ACDC Metals
Performance |
| Timeline |
| Red Hill Iron |
| ACDC Metals |
Red Hill and ACDC Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Hill and ACDC Metals
The main advantage of trading using opposite Red Hill and ACDC Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Hill position performs unexpectedly, ACDC 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 ACDC Metals will offset losses from the drop in ACDC Metals' long position.The idea behind Red Hill Iron and ACDC Metals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| ACDC Metals vs. Flagship Investments | ACDC Metals vs. Alto Metals | ACDC Metals vs. Janison Education Group | ACDC Metals vs. Centuria Industrial Reit |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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