Correlation Between Iron Road and Asara Resources

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

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

Diversification Opportunities for Iron Road and Asara Resources

0.06

Correlation Coefficient

Iron Road  Asara Resources

Significant diversification

The 3 months correlation between Iron and Asara is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and Asara Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asara Resources and Iron Road 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 Iron Road are associated (or correlated) with Asara Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asara Resources has no effect on the direction of Iron Road i.e., Iron Road and Asara Resources go up and down completely randomly.

Pair Corralation between Iron Road and Asara Resources

Assuming the 90 days trading horizon Iron Road is expected to generate 0.36 times more return on investment than Asara Resources. However, Iron Road is 2.79 times less risky than Asara Resources. It trades about -0.08 of its potential returns per unit of risk. Asara Resources is currently generating about -0.19 per unit of risk. If you would invest  5.90  in Iron Road on October 8, 2024 and sell it today you would lose (0.20) from holding Iron Road or give up 3.39% of portfolio value over 90 days.

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

Iron Road  vs.  Asara Resources

Iron Road

Risk-Adjusted Performance

0 of 100

Very Weak

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

Asara Resources

Risk-Adjusted Performance

3 of 100

Weak

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

Pair Trading with Iron Road and Asara Resources

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

The idea behind Iron Road and Asara Resources 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.