Correlation Between Iron Road and School Specialty

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

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

Diversification Opportunities for Iron Road and School Specialty

1.0

Correlation Coefficient

Iron Road  School Specialty

No risk reduction

The 3 months correlation between Iron and School is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road Limited and School Specialty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on School Specialty 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 Limited are associated (or correlated) with School Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of School Specialty has no effect on the direction of Iron Road i.e., Iron Road and School Specialty go up and down completely randomly.

Pair Corralation between Iron Road and School Specialty

If you would invest  0.01  in School Specialty on September 23, 2024 and sell it today you would earn a total of  0.00  from holding School Specialty or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.48%
Values	Daily Returns

Iron Road Limited  vs.  School Specialty

Iron Road Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron Road Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Iron Road is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

School Specialty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days School Specialty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, School Specialty is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Iron Road and School Specialty

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

The idea behind Iron Road Limited and School Specialty 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.