Correlation Between Iron Force and Great China

Can any of the company-specific risk be diversified away by investing in both Iron Force and Great China 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 Great China 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 Great China Metal, you can compare the effects of market volatilities on Iron Force and Great China 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 Great China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Force and Great China.

Diversification Opportunities for Iron Force and Great China

0.06

Correlation Coefficient

Iron Force  Great China

Significant diversification

The 3 months correlation between Iron and Great is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Iron Force Industrial and Great China Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great China Metal 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 Great China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great China Metal has no effect on the direction of Iron Force i.e., Iron Force and Great China go up and down completely randomly.

Pair Corralation between Iron Force and Great China

Assuming the 90 days trading horizon Iron Force Industrial is expected to under-perform the Great China. In addition to that, Iron Force is 6.35 times more volatile than Great China Metal. It trades about -0.1 of its total potential returns per unit of risk. Great China Metal is currently generating about 0.0 per unit of volatility. If you would invest  2,295  in Great China Metal on September 14, 2024 and sell it today you would earn a total of  0.00  from holding Great China Metal or generate 0.0% return on investment over 90 days.

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

Iron Force Industrial  vs.  Great China Metal

Iron Force Industrial

Risk-Adjusted Performance

0 of 100

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Great China Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great China Metal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Great China 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 Great China

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

The idea behind Iron Force Industrial and Great China Metal 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.