Correlation Between Iron Road and STWC Holdings

Can any of the company-specific risk be diversified away by investing in both Iron Road and STWC Holdings 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 STWC Holdings 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 STWC Holdings, you can compare the effects of market volatilities on Iron Road and STWC Holdings 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 STWC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Road and STWC Holdings.

Diversification Opportunities for Iron Road and STWC Holdings

1.0

Correlation Coefficient

Iron Road  STWC Holdings

No risk reduction

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

Pair Corralation between Iron Road and STWC Holdings

If you would invest  0.01  in STWC Holdings on September 14, 2024 and sell it today you would earn a total of  0.00  from holding STWC Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Iron Road Limited  vs.  STWC Holdings

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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

STWC Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STWC Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, STWC Holdings is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Iron Road and STWC Holdings

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

The idea behind Iron Road Limited and STWC Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.