Correlation Between Iron Force and Connection Technology

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

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

Diversification Opportunities for Iron Force and Connection Technology

0.63

Correlation Coefficient

Iron Force  Connection Technology

Poor diversification

The 3 months correlation between Iron and Connection is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Iron Force Industrial and Connection Technology Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Connection Technology and Iron Force 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 Force Industrial are associated (or correlated) with Connection Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Connection Technology has no effect on the direction of Iron Force i.e., Iron Force and Connection Technology go up and down completely randomly.

Pair Corralation between Iron Force and Connection Technology

Assuming the 90 days trading horizon Iron Force Industrial is expected to under-perform the Connection Technology. But the stock apears to be less risky and, when comparing its historical volatility, Iron Force Industrial is 1.39 times less risky than Connection Technology. The stock trades about -0.04 of its potential returns per unit of risk. The Connection Technology Systems is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,020  in Connection Technology Systems on December 24, 2024 and sell it today you would lose (40.00) from holding Connection Technology Systems or give up 1.98% of portfolio value over 90 days.

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

Iron Force Industrial  vs.  Connection Technology Systems

Iron Force Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Iron Force Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Iron Force is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Connection Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Connection Technology Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Connection Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Iron Force and Connection Technology

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

The idea behind Iron Force Industrial and Connection Technology Systems 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.