Correlation Between Mount Gibson and Australian Strategic

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

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

Diversification Opportunities for Mount Gibson and Australian Strategic

0.59

Correlation Coefficient

Mount Gibson  Australian Strategic

Very weak diversification

The 3 months correlation between Mount and Australian is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Mount Gibson Iron and Australian Strategic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Strategic and Mount Gibson 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 Mount Gibson Iron are associated (or correlated) with Australian Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Strategic has no effect on the direction of Mount Gibson i.e., Mount Gibson and Australian Strategic go up and down completely randomly.

Pair Corralation between Mount Gibson and Australian Strategic

Assuming the 90 days trading horizon Mount Gibson Iron is expected to generate 0.61 times more return on investment than Australian Strategic. However, Mount Gibson Iron is 1.65 times less risky than Australian Strategic. It trades about -0.02 of its potential returns per unit of risk. Australian Strategic Materials is currently generating about -0.02 per unit of risk. If you would invest  48.00  in Mount Gibson Iron on September 24, 2024 and sell it today you would lose (18.00) from holding Mount Gibson Iron or give up 37.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Mount Gibson Iron  vs.  Australian Strategic Materials

Mount Gibson Iron

Risk-Adjusted Performance

0 of 100

Very Weak

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

Australian Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mount Gibson and Australian Strategic

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

The idea behind Mount Gibson Iron and Australian Strategic Materials 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.