Correlation Between Red Hill and Adriatic Metals

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

Diversification Opportunities for Red Hill and Adriatic Metals

0.32

Correlation Coefficient

Red Hill  Adriatic Metals

Weak diversification

The 3 months correlation between Red and Adriatic is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Red Hill Iron and Adriatic Metals Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adriatic Metals Plc 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 Adriatic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adriatic Metals Plc has no effect on the direction of Red Hill i.e., Red Hill and Adriatic Metals go up and down completely randomly.

Pair Corralation between Red Hill and Adriatic Metals

Assuming the 90 days trading horizon Red Hill is expected to generate 1.11 times less return on investment than Adriatic Metals. But when comparing it to its historical volatility, Red Hill Iron is 1.08 times less risky than Adriatic Metals. It trades about 0.02 of its potential returns per unit of risk. Adriatic Metals Plc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  358.00  in Adriatic Metals Plc on October 9, 2024 and sell it today you would earn a total of  25.00  from holding Adriatic Metals Plc or generate 6.98% return on investment over 90 days.

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

Red Hill Iron  vs.  Adriatic Metals Plc

Red Hill Iron

Risk-Adjusted Performance

7 of 100

OK

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.

Adriatic Metals Plc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Adriatic Metals Plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Adriatic Metals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Red Hill and Adriatic Metals

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

The idea behind Red Hill Iron and Adriatic Metals Plc 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.