Correlation Between Iron Road and Pinnacle Investment

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

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

Diversification Opportunities for Iron Road and Pinnacle Investment

0.41

Correlation Coefficient

Iron Road  Pinnacle Investment

Very weak diversification

The 3 months correlation between Iron and Pinnacle is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and Pinnacle Investment Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinnacle Investment 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 Pinnacle Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinnacle Investment has no effect on the direction of Iron Road i.e., Iron Road and Pinnacle Investment go up and down completely randomly.

Pair Corralation between Iron Road and Pinnacle Investment

Assuming the 90 days trading horizon Iron Road is expected to generate 0.81 times more return on investment than Pinnacle Investment. However, Iron Road is 1.23 times less risky than Pinnacle Investment. It trades about -0.12 of its potential returns per unit of risk. Pinnacle Investment Management is currently generating about -0.12 per unit of risk. If you would invest  5.90  in Iron Road on December 30, 2024 and sell it today you would lose (0.90) from holding Iron Road or give up 15.25% of portfolio value over 90 days.

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

Iron Road  vs.  Pinnacle Investment Management

Iron Road

Risk-Adjusted Performance

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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pinnacle Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pinnacle Investment Management 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 forward indicators remain comparatively stable which may send shares a bit higher in April 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 Pinnacle Investment

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

The idea behind Iron Road and Pinnacle Investment Management 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 Transaction History module to view history of all your transactions and understand their impact on performance.