Correlation Between Ironbark Capital and BSA

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

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

Diversification Opportunities for Ironbark Capital and BSA

0.25

Correlation Coefficient

Ironbark Capital  BSA

Modest diversification

The 3 months correlation between Ironbark and BSA is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ironbark Capital and BSA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BSA and Ironbark Capital 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 Ironbark Capital are associated (or correlated) with BSA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BSA has no effect on the direction of Ironbark Capital i.e., Ironbark Capital and BSA go up and down completely randomly.

Pair Corralation between Ironbark Capital and BSA

Assuming the 90 days trading horizon Ironbark Capital is expected to generate 0.4 times more return on investment than BSA. However, Ironbark Capital is 2.52 times less risky than BSA. It trades about 0.0 of its potential returns per unit of risk. BSA is currently generating about -0.06 per unit of risk. If you would invest  46.00  in Ironbark Capital on October 22, 2024 and sell it today you would earn a total of  0.00  from holding Ironbark Capital or generate 0.0% return on investment over 90 days.

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

Ironbark Capital  vs.  BSA

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.

BSA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BSA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ironbark Capital and BSA

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

The idea behind Ironbark Capital and BSA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.