Correlation Between Ironbark Capital and Galan Lithium

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

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

Diversification Opportunities for Ironbark Capital and Galan Lithium

0.37

Correlation Coefficient

Ironbark Capital  Galan Lithium

Weak diversification

The 3 months correlation between Ironbark and Galan is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ironbark Capital and Galan Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galan Lithium 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 Galan Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galan Lithium has no effect on the direction of Ironbark Capital i.e., Ironbark Capital and Galan Lithium go up and down completely randomly.

Pair Corralation between Ironbark Capital and Galan Lithium

Assuming the 90 days trading horizon Ironbark Capital is expected to generate 0.23 times more return on investment than Galan Lithium. However, Ironbark Capital is 4.29 times less risky than Galan Lithium. It trades about 0.02 of its potential returns per unit of risk. Galan Lithium is currently generating about -0.05 per unit of risk. If you would invest  44.00  in Ironbark Capital on October 11, 2024 and sell it today you would earn a total of  3.00  from holding Ironbark Capital or generate 6.82% 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.  Galan Lithium

Ironbark Capital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ironbark Capital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Galan Lithium

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Galan Lithium are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Galan Lithium unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ironbark Capital and Galan Lithium

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

The idea behind Ironbark Capital and Galan Lithium 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.