Correlation Between Dexus Convenience and Red Hill

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

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

Diversification Opportunities for Dexus Convenience and Red Hill

-0.59

Correlation Coefficient

Dexus Convenience  Red Hill

Excellent diversification

The 3 months correlation between Dexus and Red is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Dexus Convenience Retail 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 Dexus Convenience 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 Dexus Convenience Retail 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 Dexus Convenience i.e., Dexus Convenience and Red Hill go up and down completely randomly.

Pair Corralation between Dexus Convenience and Red Hill

Assuming the 90 days trading horizon Dexus Convenience Retail is expected to generate 0.65 times more return on investment than Red Hill. However, Dexus Convenience Retail is 1.54 times less risky than Red Hill. It trades about 0.18 of its potential returns per unit of risk. Red Hill Iron is currently generating about -0.1 per unit of risk. If you would invest  286.00  in Dexus Convenience Retail on October 6, 2024 and sell it today you would earn a total of  9.00  from holding Dexus Convenience Retail or generate 3.15% return on investment over 90 days.

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

Dexus Convenience Retail  vs.  Red Hill Iron

Dexus Convenience Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dexus Convenience Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Dexus Convenience is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Red Hill Iron

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Red Hill Iron are ranked lower than 7 (%) 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 Dexus Convenience and Red Hill

The main advantage of trading using opposite Dexus Convenience and Red Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dexus Convenience 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 Dexus Convenience Retail 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.