Correlation Between Iron Road and Red Mountain

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

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

Diversification Opportunities for Iron Road and Red Mountain

0.11

Correlation Coefficient

Iron Road  Red Mountain

Average diversification

The 3 months correlation between Iron and Red is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and Red Mountain Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Mountain Mining 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 Red Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Mountain Mining has no effect on the direction of Iron Road i.e., Iron Road and Red Mountain go up and down completely randomly.

Pair Corralation between Iron Road and Red Mountain

Assuming the 90 days trading horizon Iron Road is expected to under-perform the Red Mountain. But the stock apears to be less risky and, when comparing its historical volatility, Iron Road is 3.27 times less risky than Red Mountain. The stock trades about -0.09 of its potential returns per unit of risk. The Red Mountain Mining is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.80  in Red Mountain Mining on October 25, 2024 and sell it today you would earn a total of  0.00  from holding Red Mountain Mining or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Iron Road  vs.  Red Mountain Mining

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.

Red Mountain Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Red Mountain Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Red Mountain unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iron Road and Red Mountain

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

The idea behind Iron Road and Red Mountain Mining 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.

Check out your portfolio center.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..