Correlation Between De Grey and Red Hill

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

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

Diversification Opportunities for De Grey and Red Hill

0.81

Correlation Coefficient

De Grey  Red Hill

Very poor diversification

The 3 months correlation between DEG and Red is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding De Grey Mining 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 De Grey 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 De Grey Mining 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 De Grey i.e., De Grey and Red Hill go up and down completely randomly.

Pair Corralation between De Grey and Red Hill

Assuming the 90 days trading horizon De Grey Mining is expected to generate 0.77 times more return on investment than Red Hill. However, De Grey Mining is 1.31 times less risky than Red Hill. It trades about 0.15 of its potential returns per unit of risk. Red Hill Iron is currently generating about 0.11 per unit of risk. If you would invest  120.00  in De Grey Mining on August 31, 2024 and sell it today you would earn a total of  30.00  from holding De Grey Mining or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

De Grey Mining  vs.  Red Hill Iron

De Grey Mining

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in De Grey Mining are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, De Grey unveiled solid returns over the last few months and may actually be approaching a breakup point.

Red Hill Iron

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Red Hill Iron are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Red Hill unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with De Grey and Red Hill

The main advantage of trading using opposite De Grey and Red Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if De Grey 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 De Grey Mining 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.