Correlation Between Alderon Iron and Waters

Can any of the company-specific risk be diversified away by investing in both Alderon Iron and Waters 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 Alderon Iron and Waters into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alderon Iron Ore and Waters, you can compare the effects of market volatilities on Alderon Iron and Waters 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 Alderon Iron with a short position of Waters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alderon Iron and Waters.

Diversification Opportunities for Alderon Iron and Waters

0.0

Correlation Coefficient

Alderon Iron  Waters

Pay attention - limited upside

The 3 months correlation between Alderon and Waters is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Alderon Iron Ore and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters and Alderon 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 Alderon Iron Ore are associated (or correlated) with Waters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waters has no effect on the direction of Alderon Iron i.e., Alderon Iron and Waters go up and down completely randomly.

Pair Corralation between Alderon Iron and Waters

If you would invest  33,698  in Waters on February 29, 2024 and sell it today you would lose (514.00) from holding Waters or give up 1.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Alderon Iron Ore  vs.  Waters

Alderon Iron Ore

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alderon Iron Ore has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Alderon Iron is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Waters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waters has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Waters is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alderon Iron and Waters

The main advantage of trading using opposite Alderon Iron and Waters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alderon Iron position performs unexpectedly, Waters 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 Waters will offset losses from the drop in Waters' long position.

The idea behind Alderon Iron Ore and Waters 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.