Correlation Between Iron and Contact Financial

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

By analyzing existing cross correlation between Iron And Steel and Contact Financial Holding, you can compare the effects of market volatilities on Iron and Contact Financial 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 with a short position of Contact Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron and Contact Financial.

Diversification Opportunities for Iron and Contact Financial

-0.23

Correlation Coefficient

Iron  Contact Financial

Very good diversification

The 3 months correlation between Iron and Contact is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Iron And Steel and Contact Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Contact Financial Holding and Iron 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 And Steel are associated (or correlated) with Contact Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Contact Financial Holding has no effect on the direction of Iron i.e., Iron and Contact Financial go up and down completely randomly.

Pair Corralation between Iron and Contact Financial

Assuming the 90 days trading horizon Iron And Steel is expected to generate 2.69 times more return on investment than Contact Financial. However, Iron is 2.69 times more volatile than Contact Financial Holding. It trades about 0.14 of its potential returns per unit of risk. Contact Financial Holding is currently generating about 0.0 per unit of risk. If you would invest  407.00  in Iron And Steel on December 22, 2024 and sell it today you would earn a total of  175.00  from holding Iron And Steel or generate 43.0% return on investment over 90 days.

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

Iron And Steel  vs.  Contact Financial Holding

Iron And Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Iron And Steel are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Iron reported solid returns over the last few months and may actually be approaching a breakup point.

Contact Financial Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Contact Financial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Contact Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Iron and Contact Financial

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

The idea behind Iron And Steel and Contact Financial Holding 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.