Correlation Between All Iron and Caixabank
Can any of the company-specific risk be diversified away by investing in both All Iron and Caixabank 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 All Iron and Caixabank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between All Iron Re and Caixabank SA, you can compare the effects of market volatilities on All Iron and Caixabank 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 All Iron with a short position of Caixabank. Check out your portfolio center. Please also check ongoing floating volatility patterns of All Iron and Caixabank.
Diversification Opportunities for All Iron and Caixabank
Poor diversification
The 3 months correlation between All and Caixabank is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding All Iron Re and Caixabank SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caixabank SA and All Iron 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 All Iron Re are associated (or correlated) with Caixabank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caixabank SA has no effect on the direction of All Iron i.e., All Iron and Caixabank go up and down completely randomly.
Pair Corralation between All Iron and Caixabank
Assuming the 90 days trading horizon All Iron Re is expected to generate 0.82 times more return on investment than Caixabank. However, All Iron Re is 1.23 times less risky than Caixabank. It trades about 0.09 of its potential returns per unit of risk. Caixabank SA is currently generating about -0.04 per unit of risk. If you would invest 970.00 in All Iron Re on August 28, 2024 and sell it today you would earn a total of 80.00 from holding All Iron Re or generate 8.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.46% |
| Values | Daily Returns |
All Iron Re vs. Caixabank SA
Performance |
| Timeline |
| All Iron Re |
| Caixabank SA |
All Iron and Caixabank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with All Iron and Caixabank
The main advantage of trading using opposite All Iron and Caixabank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if All Iron position performs unexpectedly, Caixabank 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 Caixabank will offset losses from the drop in Caixabank's long position.The idea behind All Iron Re and Caixabank SA 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.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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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