Correlation Between Iron Road and Bendigo

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

By analyzing existing cross correlation between Iron Road and Bendigo And Adelaide, you can compare the effects of market volatilities on Iron Road and Bendigo 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 Bendigo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Road and Bendigo.

Diversification Opportunities for Iron Road and Bendigo

-0.6

Correlation Coefficient

Iron Road  Bendigo

Excellent diversification

The 3 months correlation between Iron and Bendigo is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and Bendigo And Adelaide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bendigo And Adelaide 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 Bendigo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bendigo And Adelaide has no effect on the direction of Iron Road i.e., Iron Road and Bendigo go up and down completely randomly.

Pair Corralation between Iron Road and Bendigo

Assuming the 90 days trading horizon Iron Road is expected to under-perform the Bendigo. In addition to that, Iron Road is 1.71 times more volatile than Bendigo And Adelaide. It trades about -0.08 of its total potential returns per unit of risk. Bendigo And Adelaide is currently generating about -0.09 per unit of volatility. If you would invest  1,346  in Bendigo And Adelaide on October 8, 2024 and sell it today you would lose (31.00) from holding Bendigo And Adelaide or give up 2.3% of portfolio value over 90 days.

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

Iron Road  vs.  Bendigo And Adelaide

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 uncertain 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.

Bendigo And Adelaide

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bendigo And Adelaide are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bendigo unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iron Road and Bendigo

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

The idea behind Iron Road and Bendigo And Adelaide 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.