Correlation Between Red Hill and Steamships Trading
Can any of the company-specific risk be diversified away by investing in both Red Hill and Steamships Trading 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 Steamships Trading 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 Steamships Trading, you can compare the effects of market volatilities on Red Hill and Steamships Trading 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 Steamships Trading. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Hill and Steamships Trading.
Diversification Opportunities for Red Hill and Steamships Trading
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Red and Steamships is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Red Hill Iron and Steamships Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steamships Trading 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 Steamships Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steamships Trading has no effect on the direction of Red Hill i.e., Red Hill and Steamships Trading go up and down completely randomly.
Pair Corralation between Red Hill and Steamships Trading
Assuming the 90 days trading horizon Red Hill Iron is expected to generate 7.91 times more return on investment than Steamships Trading. However, Red Hill is 7.91 times more volatile than Steamships Trading. It trades about 0.18 of its potential returns per unit of risk. Steamships Trading is currently generating about -0.2 per unit of risk. If you would invest 382.00 in Red Hill Iron on September 13, 2024 and sell it today you would earn a total of 38.00 from holding Red Hill Iron or generate 9.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Hill Iron vs. Steamships Trading
Performance |
| Timeline |
| Red Hill Iron |
| Steamships Trading |
Red Hill and Steamships Trading Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Hill and Steamships Trading
The main advantage of trading using opposite Red Hill and Steamships Trading positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Hill position performs unexpectedly, Steamships Trading 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 Steamships Trading will offset losses from the drop in Steamships Trading'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 |
| Steamships Trading vs. Centuria Industrial Reit | Steamships Trading vs. Retail Food Group | Steamships Trading vs. Ironbark Capital | Steamships Trading vs. Aeris Environmental |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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