Correlation Between Red Hill and Duxton Broadacre

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

Diversification Opportunities for Red Hill and Duxton Broadacre

-0.17

Correlation Coefficient

Red Hill  Duxton Broadacre

Good diversification

The 3 months correlation between Red and Duxton is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Red Hill Iron and Duxton Broadacre Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duxton Broadacre Farms 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 Duxton Broadacre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duxton Broadacre Farms has no effect on the direction of Red Hill i.e., Red Hill and Duxton Broadacre go up and down completely randomly.

Pair Corralation between Red Hill and Duxton Broadacre

Assuming the 90 days trading horizon Red Hill Iron is expected to under-perform the Duxton Broadacre. But the stock apears to be less risky and, when comparing its historical volatility, Red Hill Iron is 1.04 times less risky than Duxton Broadacre. The stock trades about -0.1 of its potential returns per unit of risk. The Duxton Broadacre Farms is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  136.00  in Duxton Broadacre Farms on October 6, 2024 and sell it today you would earn a total of  3.00  from holding Duxton Broadacre Farms or generate 2.21% return on investment over 90 days.

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

Red Hill Iron  vs.  Duxton Broadacre Farms

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 unveiled solid returns over the last few months and may actually be approaching a breakup point.

Duxton Broadacre Farms

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Duxton Broadacre Farms are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Duxton Broadacre 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 Duxton Broadacre

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

The idea behind Red Hill Iron and Duxton Broadacre Farms 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..