Correlation Between Red Hill and Globe Metals

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

Diversification Opportunities for Red Hill and Globe Metals

0.85

Correlation Coefficient

Red Hill  Globe Metals

Very poor diversification

The 3 months correlation between Red and Globe is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Red Hill Iron and Globe Metals Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Metals Mining 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 Globe Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globe Metals Mining has no effect on the direction of Red Hill i.e., Red Hill and Globe Metals go up and down completely randomly.

Pair Corralation between Red Hill and Globe Metals

Assuming the 90 days trading horizon Red Hill Iron is expected to generate 0.38 times more return on investment than Globe Metals. However, Red Hill Iron is 2.61 times less risky than Globe Metals. It trades about -0.26 of its potential returns per unit of risk. Globe Metals Mining is currently generating about -0.11 per unit of risk. If you would invest  412.00  in Red Hill Iron on December 20, 2024 and sell it today you would lose (97.00) from holding Red Hill Iron or give up 23.54% of portfolio value over 90 days.

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

Red Hill Iron  vs.  Globe Metals Mining

Red Hill Iron

Risk-Adjusted Performance

Very Weak

Over the last 90 days Red Hill Iron 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 forward indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Globe Metals Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Globe Metals Mining 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 technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Red Hill and Globe Metals

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

The idea behind Red Hill Iron and Globe Metals Mining 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.