Correlation Between Iron Road and Platinum Asset

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

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

Diversification Opportunities for Iron Road and Platinum Asset

0.76

Correlation Coefficient

Iron Road  Platinum Asset

Poor diversification

The 3 months correlation between Iron and Platinum is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and Platinum Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum Asset Management 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 Platinum Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum Asset Management has no effect on the direction of Iron Road i.e., Iron Road and Platinum Asset go up and down completely randomly.

Pair Corralation between Iron Road and Platinum Asset

Assuming the 90 days trading horizon Iron Road is expected to under-perform the Platinum Asset. But the stock apears to be less risky and, when comparing its historical volatility, Iron Road is 1.41 times less risky than Platinum Asset. The stock trades about -0.07 of its potential returns per unit of risk. The Platinum Asset Management is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  65.00  in Platinum Asset Management on October 12, 2024 and sell it today you would earn a total of  5.00  from holding Platinum Asset Management or generate 7.69% return on investment over 90 days.

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

Iron Road  vs.  Platinum Asset Management

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.

Platinum Asset Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Platinum Asset 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 primary 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 Platinum Asset

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

The idea behind Iron Road and Platinum Asset 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.