Correlation Between Brickworks and Ragnar Metals

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

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

Diversification Opportunities for Brickworks and Ragnar Metals

0.05

Correlation Coefficient

Brickworks  Ragnar Metals

Significant diversification

The 3 months correlation between Brickworks and Ragnar is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Brickworks and Ragnar Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ragnar Metals and Brickworks 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 Brickworks are associated (or correlated) with Ragnar Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ragnar Metals has no effect on the direction of Brickworks i.e., Brickworks and Ragnar Metals go up and down completely randomly.

Pair Corralation between Brickworks and Ragnar Metals

Assuming the 90 days trading horizon Brickworks is expected to under-perform the Ragnar Metals. But the stock apears to be less risky and, when comparing its historical volatility, Brickworks is 3.1 times less risky than Ragnar Metals. The stock trades about -0.01 of its potential returns per unit of risk. The Ragnar Metals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2.20  in Ragnar Metals on October 4, 2024 and sell it today you would lose (0.25) from holding Ragnar Metals or give up 11.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.7%
Values	Daily Returns

Brickworks  vs.  Ragnar Metals

Brickworks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brickworks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Ragnar Metals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ragnar Metals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Ragnar Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brickworks and Ragnar Metals

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

The idea behind Brickworks and Ragnar Metals 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.