Correlation Between Iron Road and Chalice Mining

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

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

Diversification Opportunities for Iron Road and Chalice Mining

0.73

Correlation Coefficient

Iron Road  Chalice Mining

Poor diversification

The 3 months correlation between Iron and Chalice is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and Chalice Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chalice Mining 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 Chalice Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chalice Mining has no effect on the direction of Iron Road i.e., Iron Road and Chalice Mining go up and down completely randomly.

Pair Corralation between Iron Road and Chalice Mining

Assuming the 90 days trading horizon Iron Road is expected to generate 1.07 times more return on investment than Chalice Mining. However, Iron Road is 1.07 times more volatile than Chalice Mining Limited. It trades about -0.08 of its potential returns per unit of risk. Chalice Mining Limited is currently generating about -0.29 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	Significant
Accuracy	100.0%
Values	Daily Returns

Iron Road  vs.  Chalice Mining Limited

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.

Chalice Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chalice Mining Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Iron Road and Chalice Mining

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

The idea behind Iron Road and Chalice Mining 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.