Correlation Between Red Hill and Cochlear
Can any of the company-specific risk be diversified away by investing in both Red Hill and Cochlear 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 Cochlear 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 Cochlear, you can compare the effects of market volatilities on Red Hill and Cochlear 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 Cochlear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Hill and Cochlear.
Diversification Opportunities for Red Hill and Cochlear
Very weak diversification
The 3 months correlation between Red and Cochlear is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Red Hill Iron and Cochlear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cochlear 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 Cochlear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cochlear has no effect on the direction of Red Hill i.e., Red Hill and Cochlear go up and down completely randomly.
Pair Corralation between Red Hill and Cochlear
Assuming the 90 days trading horizon Red Hill Iron is expected to under-perform the Cochlear. In addition to that, Red Hill is 2.13 times more volatile than Cochlear. It trades about -0.03 of its total potential returns per unit of risk. Cochlear is currently generating about -0.02 per unit of volatility. If you would invest 31,997 in Cochlear on August 31, 2024 and sell it today you would lose (1,573) from holding Cochlear or give up 4.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Hill Iron vs. Cochlear
Performance |
| Timeline |
| Red Hill Iron |
| Cochlear |
Red Hill and Cochlear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Hill and Cochlear
The main advantage of trading using opposite Red Hill and Cochlear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Hill position performs unexpectedly, Cochlear 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 Cochlear will offset losses from the drop in Cochlear's long position.The idea behind Red Hill Iron and Cochlear 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.| Cochlear vs. Aurelia Metals | Cochlear vs. Alto Metals | Cochlear vs. Richmond Vanadium Technology | Cochlear 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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