Correlation Between Ferrexpo PLC and Ironveld Plc

Can any of the company-specific risk be diversified away by investing in both Ferrexpo PLC and Ironveld Plc 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 Ferrexpo PLC and Ironveld Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ferrexpo PLC and Ironveld Plc, you can compare the effects of market volatilities on Ferrexpo PLC and Ironveld Plc 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 Ferrexpo PLC with a short position of Ironveld Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferrexpo PLC and Ironveld Plc.

Diversification Opportunities for Ferrexpo PLC and Ironveld Plc

-0.36

Correlation Coefficient

Ferrexpo PLC  Ironveld Plc

Very good diversification

The 3 months correlation between Ferrexpo and Ironveld is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ferrexpo PLC and Ironveld Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ironveld Plc and Ferrexpo PLC 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 Ferrexpo PLC are associated (or correlated) with Ironveld Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ironveld Plc has no effect on the direction of Ferrexpo PLC i.e., Ferrexpo PLC and Ironveld Plc go up and down completely randomly.

Pair Corralation between Ferrexpo PLC and Ironveld Plc

Assuming the 90 days trading horizon Ferrexpo PLC is expected to generate 2.39 times more return on investment than Ironveld Plc. However, Ferrexpo PLC is 2.39 times more volatile than Ironveld Plc. It trades about 0.24 of its potential returns per unit of risk. Ironveld Plc is currently generating about -0.14 per unit of risk. If you would invest  4,235  in Ferrexpo PLC on September 4, 2024 and sell it today you would earn a total of  5,545  from holding Ferrexpo PLC or generate 130.93% return on investment over 90 days.

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

Ferrexpo PLC  vs.  Ironveld Plc

Ferrexpo PLC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ferrexpo PLC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ferrexpo PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ironveld Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ironveld Plc 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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Ferrexpo PLC and Ironveld Plc

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

The idea behind Ferrexpo PLC and Ironveld Plc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.