Correlation Between Hawsons Iron and Mount Gibson

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

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

Diversification Opportunities for Hawsons Iron and Mount Gibson

0.6

Correlation Coefficient

Hawsons Iron  Mount Gibson

Poor diversification

The 3 months correlation between Hawsons and Mount is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Hawsons Iron and Mount Gibson Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mount Gibson Iron and Hawsons Iron 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 Hawsons Iron are associated (or correlated) with Mount Gibson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mount Gibson Iron has no effect on the direction of Hawsons Iron i.e., Hawsons Iron and Mount Gibson go up and down completely randomly.

Pair Corralation between Hawsons Iron and Mount Gibson

Assuming the 90 days trading horizon Hawsons Iron is expected to generate 2.23 times less return on investment than Mount Gibson. In addition to that, Hawsons Iron is 1.7 times more volatile than Mount Gibson Iron. It trades about 0.02 of its total potential returns per unit of risk. Mount Gibson Iron is currently generating about 0.09 per unit of volatility. If you would invest  28.00  in Mount Gibson Iron on September 4, 2024 and sell it today you would earn a total of  4.00  from holding Mount Gibson Iron or generate 14.29% return on investment over 90 days.

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

Hawsons Iron  vs.  Mount Gibson Iron

Hawsons Iron

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hawsons Iron are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hawsons Iron may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mount Gibson Iron

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mount Gibson Iron are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Mount Gibson unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hawsons Iron and Mount Gibson

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

The idea behind Hawsons Iron and Mount Gibson 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.