Correlation Between Premier Investments and Iron Road

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

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

Diversification Opportunities for Premier Investments and Iron Road

0.83

Correlation Coefficient

Premier Investments  Iron Road

Very poor diversification

The 3 months correlation between Premier and Iron is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Premier Investments and Iron Road in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron Road and Premier Investments 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 Premier Investments are associated (or correlated) with Iron Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron Road has no effect on the direction of Premier Investments i.e., Premier Investments and Iron Road go up and down completely randomly.

Pair Corralation between Premier Investments and Iron Road

Assuming the 90 days trading horizon Premier Investments is expected to under-perform the Iron Road. In addition to that, Premier Investments is 1.91 times more volatile than Iron Road. It trades about -0.13 of its total potential returns per unit of risk. Iron Road is currently generating about -0.06 per unit of volatility. If you would invest  6.20  in Iron Road on November 29, 2024 and sell it today you would lose (0.60) from holding Iron Road or give up 9.68% of portfolio value over 90 days.

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

Premier Investments  vs.  Iron Road

Premier Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Premier Investments 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 basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Iron Road

Risk-Adjusted Performance

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 latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Premier Investments and Iron Road

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

The idea behind Premier Investments and Iron Road 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.