Correlation Between EP Financial and Ironbark Capital

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

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

Diversification Opportunities for EP Financial and Ironbark Capital

0.56

Correlation Coefficient

EP Financial  Ironbark Capital

Very weak diversification

The 3 months correlation between EP1 and Ironbark is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding EP Financial Group and Ironbark Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ironbark Capital and EP Financial 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 EP Financial Group are associated (or correlated) with Ironbark Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ironbark Capital has no effect on the direction of EP Financial i.e., EP Financial and Ironbark Capital go up and down completely randomly.

Pair Corralation between EP Financial and Ironbark Capital

Assuming the 90 days trading horizon EP Financial Group is expected to generate 3.55 times more return on investment than Ironbark Capital. However, EP Financial is 3.55 times more volatile than Ironbark Capital. It trades about 0.07 of its potential returns per unit of risk. Ironbark Capital is currently generating about 0.01 per unit of risk. If you would invest  46.00  in EP Financial Group on September 1, 2024 and sell it today you would earn a total of  6.00  from holding EP Financial Group or generate 13.04% return on investment over 90 days.

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

EP Financial Group  vs.  Ironbark Capital

EP Financial Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EP Financial Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, EP Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ironbark Capital

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with EP Financial and Ironbark Capital

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

The idea behind EP Financial Group and Ironbark Capital 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.