Correlation Between Red Hill and Iron Road
Can any of the company-specific risk be diversified away by investing in both Red Hill and Iron Road 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 Iron Road 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 Iron Road, you can compare the effects of market volatilities on Red Hill and Iron Road 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 Iron Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Hill and Iron Road.
Diversification Opportunities for Red Hill and Iron Road
Very weak diversification
The 3 months correlation between Red and Iron is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Red Hill Iron and Iron Road in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron Road 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 Iron Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron Road has no effect on the direction of Red Hill i.e., Red Hill and Iron Road go up and down completely randomly.
Pair Corralation between Red Hill and Iron Road
Assuming the 90 days trading horizon Red Hill Iron is expected to generate 0.77 times more return on investment than Iron Road. However, Red Hill Iron is 1.29 times less risky than Iron Road. It trades about 0.02 of its potential returns per unit of risk. Iron Road is currently generating about -0.03 per unit of risk. If you would invest 316.00 in Red Hill Iron on November 27, 2024 and sell it today you would earn a total of 34.00 from holding Red Hill Iron or generate 10.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Hill Iron vs. Iron Road
Performance |
| Timeline |
| Red Hill Iron |
| Iron Road |
Red Hill and Iron Road Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Hill and Iron Road
The main advantage of trading using opposite Red Hill and Iron Road positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Hill position performs unexpectedly, Iron Road 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 Iron Road will offset losses from the drop in Iron Road's long position.| Red Hill vs. Saferoads Holdings | Red Hill vs. Galena Mining | Red Hill vs. Gateway Mining | Red Hill vs. Globe Metals Mining |
| Iron Road vs. Northern Star Resources | Iron Road vs. Alcoa Inc | Iron Road vs. Evolution Mining | Iron Road vs. Bluescope Steel |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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