Correlation Between All Iron and Berkeley Energia

Can any of the company-specific risk be diversified away by investing in both All Iron and Berkeley Energia 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 All Iron and Berkeley Energia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between All Iron Re and Berkeley Energia Limited, you can compare the effects of market volatilities on All Iron and Berkeley Energia 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 All Iron with a short position of Berkeley Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of All Iron and Berkeley Energia.

Diversification Opportunities for All Iron and Berkeley Energia

0.44

Correlation Coefficient

All Iron  Berkeley Energia

Very weak diversification

The 3 months correlation between All and Berkeley is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding All Iron Re and Berkeley Energia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkeley Energia and All Iron 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 All Iron Re are associated (or correlated) with Berkeley Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkeley Energia has no effect on the direction of All Iron i.e., All Iron and Berkeley Energia go up and down completely randomly.

Pair Corralation between All Iron and Berkeley Energia

Assuming the 90 days trading horizon All Iron Re is expected to under-perform the Berkeley Energia. But the stock apears to be less risky and, when comparing its historical volatility, All Iron Re is 1.38 times less risky than Berkeley Energia. The stock trades about -0.01 of its potential returns per unit of risk. The Berkeley Energia Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Berkeley Energia Limited on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Berkeley Energia Limited or generate 0.0% return on investment over 90 days.

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

All Iron Re  vs.  Berkeley Energia Limited

All Iron Re

Risk-Adjusted Performance

7 of 100

OK

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

Berkeley Energia

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Berkeley Energia Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Berkeley Energia is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with All Iron and Berkeley Energia

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

The idea behind All Iron Re and Berkeley Energia 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..