Correlation Between Flinders Resources and Black Iron

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

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

Diversification Opportunities for Flinders Resources and Black Iron

0.85

Correlation Coefficient

Flinders Resources  Black Iron

Very poor diversification

The 3 months correlation between Flinders and Black is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Flinders Resources Limited and Black Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Iron and Flinders Resources 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 Flinders Resources Limited are associated (or correlated) with Black Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Iron has no effect on the direction of Flinders Resources i.e., Flinders Resources and Black Iron go up and down completely randomly.

Pair Corralation between Flinders Resources and Black Iron

Assuming the 90 days horizon Flinders Resources Limited is expected to generate 0.72 times more return on investment than Black Iron. However, Flinders Resources Limited is 1.38 times less risky than Black Iron. It trades about 0.13 of its potential returns per unit of risk. Black Iron is currently generating about 0.05 per unit of risk. If you would invest  20.00  in Flinders Resources Limited on October 9, 2024 and sell it today you would earn a total of  552.00  from holding Flinders Resources Limited or generate 2760.0% return on investment over 90 days.

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

Flinders Resources Limited  vs.  Black Iron

Flinders Resources

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Flinders Resources Limited are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Flinders Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Black Iron

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Black Iron are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Black Iron displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Flinders Resources and Black Iron

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

The idea behind Flinders Resources Limited and Black 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.