Correlation Between Iron Road and Alumina
Can any of the company-specific risk be diversified away by investing in both Iron Road and Alumina 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 Iron Road and Alumina into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iron Road Limited and Alumina Limited, you can compare the effects of market volatilities on Iron Road and Alumina 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 Iron Road with a short position of Alumina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Road and Alumina.
Diversification Opportunities for Iron Road and Alumina
Pay attention - limited upside
The 3 months correlation between Iron and Alumina is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road Limited and Alumina Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumina Limited and Iron Road 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 Iron Road Limited are associated (or correlated) with Alumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumina Limited has no effect on the direction of Iron Road i.e., Iron Road and Alumina go up and down completely randomly.
Pair Corralation between Iron Road and Alumina
If you would invest 70.00 in Alumina Limited on February 28, 2024 and sell it today you would earn a total of 50.00 from holding Alumina Limited or generate 71.43% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Flat |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Iron Road Limited vs. Alumina Limited
Performance |
Timeline |
Iron Road Limited |
Alumina Limited |
Iron Road and Alumina Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Iron Road and Alumina
The main advantage of trading using opposite Iron Road and Alumina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Road position performs unexpectedly, Alumina 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 Alumina will offset losses from the drop in Alumina's long position.Iron Road vs. Nucor Corp | Iron Road vs. United States Steel | Iron Road vs. Reliance Steel Aluminum | Iron Road vs. ArcelorMittal SA ADR |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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