Correlation Between Ironbark Capital and Energy Technologies

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

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

Diversification Opportunities for Ironbark Capital and Energy Technologies

0.5

Correlation Coefficient

Ironbark Capital  Energy Technologies

Very weak diversification

The 3 months correlation between Ironbark and Energy is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ironbark Capital and Energy Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Technologies 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 Energy Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Technologies has no effect on the direction of Ironbark Capital i.e., Ironbark Capital and Energy Technologies go up and down completely randomly.

Pair Corralation between Ironbark Capital and Energy Technologies

Assuming the 90 days trading horizon Ironbark Capital is expected to under-perform the Energy Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Ironbark Capital is 3.55 times less risky than Energy Technologies. The stock trades about -0.04 of its potential returns per unit of risk. The Energy Technologies Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3.10  in Energy Technologies Limited on December 22, 2024 and sell it today you would earn a total of  0.10  from holding Energy Technologies Limited or generate 3.23% return on investment over 90 days.

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

Ironbark Capital  vs.  Energy Technologies Limited

Ironbark Capital

Risk-Adjusted Performance

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.

Energy Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Technologies Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Energy Technologies is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ironbark Capital and Energy Technologies

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

The idea behind Ironbark Capital and Energy Technologies Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.