Correlation Between Red Hill and Nsx
Can any of the company-specific risk be diversified away by investing in both Red Hill and Nsx 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 Nsx 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 Nsx, you can compare the effects of market volatilities on Red Hill and Nsx 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 Nsx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Hill and Nsx.
Diversification Opportunities for Red Hill and Nsx
Poor diversification
The 3 months correlation between Red and Nsx is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Red Hill Iron and Nsx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nsx 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 Nsx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nsx has no effect on the direction of Red Hill i.e., Red Hill and Nsx go up and down completely randomly.
Pair Corralation between Red Hill and Nsx
Assuming the 90 days trading horizon Red Hill Iron is expected to generate 0.3 times more return on investment than Nsx. However, Red Hill Iron is 3.36 times less risky than Nsx. It trades about 0.2 of its potential returns per unit of risk. Nsx is currently generating about -0.03 per unit of risk. If you would invest 377.00 in Red Hill Iron on September 5, 2024 and sell it today you would earn a total of 43.00 from holding Red Hill Iron or generate 11.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Hill Iron vs. Nsx
Performance |
| Timeline |
| Red Hill Iron |
| Nsx |
Red Hill and Nsx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Hill and Nsx
The main advantage of trading using opposite Red Hill and Nsx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Hill position performs unexpectedly, Nsx 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 Nsx will offset losses from the drop in Nsx's long position.| Red Hill vs. Northern Star Resources | Red Hill vs. Evolution Mining | Red Hill vs. Bluescope Steel | Red Hill vs. Sandfire Resources NL |
| Nsx vs. Red Hill Iron | Nsx vs. Microequities Asset Management | Nsx vs. Tombador Iron | Nsx 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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