Correlation Between Red Hill and Mount Gibson
Can any of the company-specific risk be diversified away by investing in both Red Hill and Mount Gibson 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 Mount Gibson 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 Mount Gibson Iron, you can compare the effects of market volatilities on Red Hill and Mount Gibson 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 Mount Gibson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Hill and Mount Gibson.
Diversification Opportunities for Red Hill and Mount Gibson
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Red and Mount is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Red Hill Iron and Mount Gibson Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mount Gibson Iron 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 Mount Gibson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mount Gibson Iron has no effect on the direction of Red Hill i.e., Red Hill and Mount Gibson go up and down completely randomly.
Pair Corralation between Red Hill and Mount Gibson
Assuming the 90 days trading horizon Red Hill Iron is expected to generate 0.93 times more return on investment than Mount Gibson. However, Red Hill Iron is 1.07 times less risky than Mount Gibson. It trades about 0.03 of its potential returns per unit of risk. Mount Gibson Iron is currently generating about -0.03 per unit of risk. If you would invest 338.00 in Red Hill Iron on October 20, 2024 and sell it today you would earn a total of 76.00 from holding Red Hill Iron or generate 22.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Hill Iron vs. Mount Gibson Iron
Performance |
| Timeline |
| Red Hill Iron |
| Mount Gibson Iron |
Red Hill and Mount Gibson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Hill and Mount Gibson
The main advantage of trading using opposite Red Hill and Mount Gibson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Hill position performs unexpectedly, Mount Gibson 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 Mount Gibson will offset losses from the drop in Mount Gibson's long position.| Red Hill vs. Centaurus Metals | Red Hill vs. Aurelia Metals | Red Hill vs. FireFly Metals | Red Hill vs. Black Rock Mining |
| Mount Gibson vs. Bio Gene Technology | Mount Gibson vs. Advanced Braking Technology | Mount Gibson vs. Dalaroo Metals | Mount Gibson 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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