Correlation Between Red Hill and Autosports Group
Can any of the company-specific risk be diversified away by investing in both Red Hill and Autosports Group 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 Autosports Group 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 Autosports Group, you can compare the effects of market volatilities on Red Hill and Autosports Group 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 Autosports Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Hill and Autosports Group.
Diversification Opportunities for Red Hill and Autosports Group
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Red and Autosports is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Red Hill Iron and Autosports Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autosports Group 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 Autosports Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autosports Group has no effect on the direction of Red Hill i.e., Red Hill and Autosports Group go up and down completely randomly.
Pair Corralation between Red Hill and Autosports Group
Assuming the 90 days trading horizon Red Hill Iron is expected to generate 1.48 times more return on investment than Autosports Group. However, Red Hill is 1.48 times more volatile than Autosports Group. It trades about 0.02 of its potential returns per unit of risk. Autosports Group is currently generating about 0.01 per unit of risk. If you would invest 353.00 in Red Hill Iron on November 9, 2024 and sell it today you would earn a total of 52.00 from holding Red Hill Iron or generate 14.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Hill Iron vs. Autosports Group
Performance |
| Timeline |
| Red Hill Iron |
| Autosports Group |
Red Hill and Autosports Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Hill and Autosports Group
The main advantage of trading using opposite Red Hill and Autosports Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Hill position performs unexpectedly, Autosports Group 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 Autosports Group will offset losses from the drop in Autosports Group's long position.| Red Hill vs. Evolution Mining | Red Hill vs. Bluescope Steel | Red Hill vs. Perseus Mining | Red Hill vs. Champion Iron |
| Autosports Group vs. PVW Resources | Autosports Group vs. Woolworths | Autosports Group vs. Wesfarmers | Autosports Group vs. Coles Group |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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