Correlation Between Iron Road and Medibank Private

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

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

Diversification Opportunities for Iron Road and Medibank Private

-0.68

Correlation Coefficient

Iron Road  Medibank Private

Excellent diversification

The 3 months correlation between Iron and Medibank is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and Medibank Private in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medibank Private 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 Medibank Private. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medibank Private has no effect on the direction of Iron Road i.e., Iron Road and Medibank Private go up and down completely randomly.

Pair Corralation between Iron Road and Medibank Private

Assuming the 90 days trading horizon Iron Road is expected to under-perform the Medibank Private. In addition to that, Iron Road is 3.12 times more volatile than Medibank Private. It trades about -0.02 of its total potential returns per unit of risk. Medibank Private is currently generating about 0.07 per unit of volatility. If you would invest  266.00  in Medibank Private on October 3, 2024 and sell it today you would earn a total of  113.00  from holding Medibank Private or generate 42.48% return on investment over 90 days.

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

Iron Road  vs.  Medibank Private

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.

Medibank Private

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Medibank Private are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Medibank Private 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 Iron Road and Medibank Private

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

The idea behind Iron Road and Medibank Private 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.