Correlation Between Associated Capital and Iris Energy

Can any of the company-specific risk be diversified away by investing in both Associated Capital and Iris Energy 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 Associated Capital and Iris Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Associated Capital Group and Iris Energy, you can compare the effects of market volatilities on Associated Capital and Iris Energy 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 Associated Capital with a short position of Iris Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated Capital and Iris Energy.

Diversification Opportunities for Associated Capital and Iris Energy

0.26

Correlation Coefficient

Associated Capital  Iris Energy

Modest diversification

The 3 months correlation between Associated and Iris is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Associated Capital Group and Iris Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iris Energy and Associated Capital 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 Associated Capital Group are associated (or correlated) with Iris Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iris Energy has no effect on the direction of Associated Capital i.e., Associated Capital and Iris Energy go up and down completely randomly.

Pair Corralation between Associated Capital and Iris Energy

Allowing for the 90-day total investment horizon Associated Capital Group is expected to generate 0.27 times more return on investment than Iris Energy. However, Associated Capital Group is 3.76 times less risky than Iris Energy. It trades about 0.08 of its potential returns per unit of risk. Iris Energy is currently generating about -0.06 per unit of risk. If you would invest  3,536  in Associated Capital Group on December 28, 2024 and sell it today you would earn a total of  273.00  from holding Associated Capital Group or generate 7.72% return on investment over 90 days.

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

Associated Capital Group  vs.  Iris Energy

Associated Capital

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Capital Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Associated Capital may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Iris Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Iris Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Associated Capital and Iris Energy

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

The idea behind Associated Capital Group and Iris Energy 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 Transaction History module to view history of all your transactions and understand their impact on performance.