Correlation Between Red Hill and Auswide Bank

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

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

Diversification Opportunities for Red Hill and Auswide Bank

0.64

Correlation Coefficient

Red Hill  Auswide Bank

Poor diversification

The 3 months correlation between Red and Auswide is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Red Hill Iron and Auswide Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auswide Bank and Red Hill 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 Red Hill Iron are associated (or correlated) with Auswide Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auswide Bank has no effect on the direction of Red Hill i.e., Red Hill and Auswide Bank go up and down completely randomly.

Pair Corralation between Red Hill and Auswide Bank

Assuming the 90 days trading horizon Red Hill Iron is expected to generate 1.73 times more return on investment than Auswide Bank. However, Red Hill is 1.73 times more volatile than Auswide Bank. It trades about 0.04 of its potential returns per unit of risk. Auswide Bank is currently generating about 0.0 per unit of risk. If you would invest  321.00  in Red Hill Iron on October 22, 2024 and sell it today you would earn a total of  93.00  from holding Red Hill Iron or generate 28.97% return on investment over 90 days.

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

Red Hill Iron  vs.  Auswide Bank

Red Hill Iron

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Red Hill Iron are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Red Hill may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Auswide Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Auswide Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Auswide Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red Hill and Auswide Bank

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

The idea behind Red Hill Iron and Auswide Bank 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.