Correlation Between Iron Road and MFF Capital

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

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

Diversification Opportunities for Iron Road and MFF Capital

-0.83

Correlation Coefficient

Iron Road  MFF Capital

Pay attention - limited upside

The 3 months correlation between Iron and MFF is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and MFF Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFF Capital Investments 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 MFF Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFF Capital Investments has no effect on the direction of Iron Road i.e., Iron Road and MFF Capital go up and down completely randomly.

Pair Corralation between Iron Road and MFF Capital

Assuming the 90 days trading horizon Iron Road is expected to under-perform the MFF Capital. In addition to that, Iron Road is 3.15 times more volatile than MFF Capital Investments. It trades about -0.05 of its total potential returns per unit of risk. MFF Capital Investments is currently generating about 0.32 per unit of volatility. If you would invest  377.00  in MFF Capital Investments on September 30, 2024 and sell it today you would earn a total of  92.00  from holding MFF Capital Investments or generate 24.4% return on investment over 90 days.

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

Iron Road  vs.  MFF Capital Investments

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.

MFF Capital Investments

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MFF Capital Investments are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, MFF Capital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iron Road and MFF Capital

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

The idea behind Iron Road and MFF Capital Investments 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.