Correlation Between Neinor Homes and All Iron

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

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

Diversification Opportunities for Neinor Homes and All Iron

-0.11

Correlation Coefficient

Neinor Homes  All Iron

Good diversification

The 3 months correlation between Neinor and All is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Neinor Homes SLU and All Iron Re in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on All Iron Re and Neinor Homes 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 Neinor Homes SLU are associated (or correlated) with All Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of All Iron Re has no effect on the direction of Neinor Homes i.e., Neinor Homes and All Iron go up and down completely randomly.

Pair Corralation between Neinor Homes and All Iron

Assuming the 90 days trading horizon Neinor Homes SLU is expected to under-perform the All Iron. In addition to that, Neinor Homes is 3.2 times more volatile than All Iron Re. It trades about -0.05 of its total potential returns per unit of risk. All Iron Re is currently generating about 0.13 per unit of volatility. If you would invest  1,100  in All Iron Re on December 21, 2024 and sell it today you would earn a total of  50.00  from holding All Iron Re or generate 4.55% return on investment over 90 days.

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

Neinor Homes SLU  vs.  All Iron Re

Neinor Homes SLU

Risk-Adjusted Performance

Very Weak

Over the last 90 days Neinor Homes SLU has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Neinor Homes is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

All Iron Re

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in All Iron Re are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, All Iron is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Neinor Homes and All Iron

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

The idea behind Neinor Homes SLU and All Iron Re 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.