Correlation Between Austral Gold and Ferrexpo PLC

Can any of the company-specific risk be diversified away by investing in both Austral Gold and Ferrexpo PLC 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 Austral Gold and Ferrexpo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Austral Gold Limited and Ferrexpo PLC, you can compare the effects of market volatilities on Austral Gold and Ferrexpo PLC 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 Austral Gold with a short position of Ferrexpo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Austral Gold and Ferrexpo PLC.

Diversification Opportunities for Austral Gold and Ferrexpo PLC

-0.35

Correlation Coefficient

Austral Gold  Ferrexpo PLC

Very good diversification

The 3 months correlation between Austral and Ferrexpo is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Austral Gold Limited and Ferrexpo PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrexpo PLC and Austral Gold 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 Austral Gold Limited are associated (or correlated) with Ferrexpo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrexpo PLC has no effect on the direction of Austral Gold i.e., Austral Gold and Ferrexpo PLC go up and down completely randomly.

Pair Corralation between Austral Gold and Ferrexpo PLC

Assuming the 90 days horizon Austral Gold Limited is expected to generate 4.7 times more return on investment than Ferrexpo PLC. However, Austral Gold is 4.7 times more volatile than Ferrexpo PLC. It trades about 0.09 of its potential returns per unit of risk. Ferrexpo PLC is currently generating about 0.01 per unit of risk. If you would invest  3.12  in Austral Gold Limited on September 30, 2024 and sell it today you would lose (0.92) from holding Austral Gold Limited or give up 29.49% of portfolio value over 90 days.

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

Austral Gold Limited  vs.  Ferrexpo PLC

Austral Gold Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Austral Gold Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental indicators, Austral Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Ferrexpo PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ferrexpo PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Ferrexpo PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Austral Gold and Ferrexpo PLC

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

The idea behind Austral Gold Limited and Ferrexpo PLC 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..