Correlation Between Boss Energy and Red Hill

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

By analyzing existing cross correlation between Boss Energy Limited and Red Hill Iron, you can compare the effects of market volatilities on Boss Energy and Red Hill 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 Boss Energy with a short position of Red Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boss Energy and Red Hill.

Diversification Opportunities for Boss Energy and Red Hill

0.4

Correlation Coefficient

Boss Energy  Red Hill

Very weak diversification

The 3 months correlation between Boss and Red is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Boss Energy Limited and Red Hill Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Hill Iron and Boss Energy 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 Boss Energy Limited are associated (or correlated) with Red Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Hill Iron has no effect on the direction of Boss Energy i.e., Boss Energy and Red Hill go up and down completely randomly.

Pair Corralation between Boss Energy and Red Hill

Assuming the 90 days trading horizon Boss Energy Limited is expected to generate 2.51 times more return on investment than Red Hill. However, Boss Energy is 2.51 times more volatile than Red Hill Iron. It trades about 0.03 of its potential returns per unit of risk. Red Hill Iron is currently generating about -0.25 per unit of risk. If you would invest  238.00  in Boss Energy Limited on December 28, 2024 and sell it today you would earn a total of  7.00  from holding Boss Energy Limited or generate 2.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Boss Energy Limited  vs.  Red Hill Iron

Boss Energy Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Boss Energy Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Boss Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Red Hill Iron

Risk-Adjusted Performance

Very Weak

Over the last 90 days Red Hill Iron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Boss Energy and Red Hill

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

The idea behind Boss Energy Limited and Red Hill 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.