Correlation Between Red Hill and Boss Energy

Can any of the company-specific risk be diversified away by investing in both Red Hill and Boss 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 Red Hill and Boss Energy 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 Boss Energy Limited, you can compare the effects of market volatilities on Red Hill and Boss 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 Red Hill with a short position of Boss Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Hill and Boss Energy.

Diversification Opportunities for Red Hill and Boss Energy

0.46

Correlation Coefficient

Red Hill  Boss Energy

Very weak diversification

The 3 months correlation between Red and Boss is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Red Hill Iron and Boss Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boss Energy Limited 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 Boss Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boss Energy Limited has no effect on the direction of Red Hill i.e., Red Hill and Boss Energy go up and down completely randomly.

Pair Corralation between Red Hill and Boss Energy

Assuming the 90 days trading horizon Red Hill Iron is expected to generate 0.91 times more return on investment than Boss Energy. However, Red Hill Iron is 1.1 times less risky than Boss Energy. It trades about 0.11 of its potential returns per unit of risk. Boss Energy Limited is currently generating about 0.02 per unit of risk. If you would invest  338.00  in Red Hill Iron on August 31, 2024 and sell it today you would earn a total of  72.00  from holding Red Hill Iron or generate 21.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Red Hill Iron  vs.  Boss Energy Limited

Red Hill Iron

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Red Hill Iron are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Red Hill unveiled solid returns over the last few months and may actually be approaching a breakup point.

Boss Energy Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Boss Energy Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Boss Energy is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Red Hill and Boss Energy

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

The idea behind Red Hill Iron and Boss Energy Limited 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.