Correlation Between NEW MILLENNIUM and Mount Gibson

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

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

Diversification Opportunities for NEW MILLENNIUM and Mount Gibson

-0.04

Correlation Coefficient

NEW MILLENNIUM  Mount Gibson

Good diversification

The 3 months correlation between NEW and Mount is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding NEW MILLENNIUM IRON and Mount Gibson Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mount Gibson Iron and NEW MILLENNIUM 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 NEW MILLENNIUM IRON are associated (or correlated) with Mount Gibson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mount Gibson Iron has no effect on the direction of NEW MILLENNIUM i.e., NEW MILLENNIUM and Mount Gibson go up and down completely randomly.

Pair Corralation between NEW MILLENNIUM and Mount Gibson

Assuming the 90 days trading horizon NEW MILLENNIUM IRON is expected to under-perform the Mount Gibson. But the stock apears to be less risky and, when comparing its historical volatility, NEW MILLENNIUM IRON is 2.03 times less risky than Mount Gibson. The stock trades about -0.1 of its potential returns per unit of risk. The Mount Gibson Iron is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Mount Gibson Iron on December 20, 2024 and sell it today you would earn a total of  1.00  from holding Mount Gibson Iron or generate 5.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

NEW MILLENNIUM IRON  vs.  Mount Gibson Iron

NEW MILLENNIUM IRON

Risk-Adjusted Performance

Very Weak

Over the last 90 days NEW MILLENNIUM IRON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Mount Gibson Iron

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mount Gibson Iron are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Mount Gibson reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEW MILLENNIUM and Mount Gibson

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

The idea behind NEW MILLENNIUM IRON and Mount Gibson Iron 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.