Correlation Between Iron Road and Mystate

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

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

Diversification Opportunities for Iron Road and Mystate

-0.71

Correlation Coefficient

Iron Road  Mystate

Pay attention - limited upside

The 3 months correlation between Iron and Mystate is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and Mystate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mystate 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 Mystate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mystate has no effect on the direction of Iron Road i.e., Iron Road and Mystate go up and down completely randomly.

Pair Corralation between Iron Road and Mystate

Assuming the 90 days trading horizon Iron Road is expected to under-perform the Mystate. In addition to that, Iron Road is 1.45 times more volatile than Mystate. It trades about -0.07 of its total potential returns per unit of risk. Mystate is currently generating about 0.18 per unit of volatility. If you would invest  413.00  in Mystate on October 5, 2024 and sell it today you would earn a total of  21.00  from holding Mystate or generate 5.08% 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.  Mystate

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 uncertain performance in the last few months, the Stock's fundamental 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.

Mystate

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mystate are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Mystate unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iron Road and Mystate

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

The idea behind Iron Road and Mystate 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.