Correlation Between Ironbark Capital and Predictive Discovery

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

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

Diversification Opportunities for Ironbark Capital and Predictive Discovery

0.18

Correlation Coefficient

Ironbark Capital  Predictive Discovery

Average diversification

The 3 months correlation between Ironbark and Predictive is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ironbark Capital and Predictive Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Predictive Discovery 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 Predictive Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Predictive Discovery has no effect on the direction of Ironbark Capital i.e., Ironbark Capital and Predictive Discovery go up and down completely randomly.

Pair Corralation between Ironbark Capital and Predictive Discovery

Assuming the 90 days trading horizon Ironbark Capital is expected to generate 7.66 times less return on investment than Predictive Discovery. But when comparing it to its historical volatility, Ironbark Capital is 3.44 times less risky than Predictive Discovery. It trades about 0.01 of its potential returns per unit of risk. Predictive Discovery is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Predictive Discovery on September 25, 2024 and sell it today you would earn a total of  4.00  from holding Predictive Discovery or generate 20.0% return on investment over 90 days.

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

Ironbark Capital  vs.  Predictive Discovery

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.

Predictive Discovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Predictive Discovery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Predictive Discovery 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 Predictive Discovery

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

The idea behind Ironbark Capital and Predictive Discovery 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.