Correlation Between NI Holdings and Iris Energy

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

By analyzing existing cross correlation between NI Holdings and Iris Energy, you can compare the effects of market volatilities on NI Holdings and Iris Energy 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 NI Holdings with a short position of Iris Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of NI Holdings and Iris Energy.

Diversification Opportunities for NI Holdings and Iris Energy

0.76

Correlation Coefficient

NI Holdings  Iris Energy

Poor diversification

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

Pair Corralation between NI Holdings and Iris Energy

Given the investment horizon of 90 days NI Holdings is expected to generate 0.26 times more return on investment than Iris Energy. However, NI Holdings is 3.86 times less risky than Iris Energy. It trades about -0.24 of its potential returns per unit of risk. Iris Energy is currently generating about -0.26 per unit of risk. If you would invest  1,671  in NI Holdings on October 7, 2024 and sell it today you would lose (109.00) from holding NI Holdings or give up 6.52% of portfolio value over 90 days.

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

NI Holdings  vs.  Iris Energy

NI Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, NI Holdings is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Iris Energy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iris Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Iris Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NI Holdings and Iris Energy

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

The idea behind NI Holdings and Iris Energy 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.