Correlation Between Iron Road and FlatexDEGIRO

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

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

Diversification Opportunities for Iron Road and FlatexDEGIRO

-0.52

Correlation Coefficient

Iron Road  FlatexDEGIRO

Excellent diversification

The 3 months correlation between Iron and FlatexDEGIRO is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road Limited and flatexDEGIRO AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on flatexDEGIRO AG and Iron Road 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 Iron Road Limited are associated (or correlated) with FlatexDEGIRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of flatexDEGIRO AG has no effect on the direction of Iron Road i.e., Iron Road and FlatexDEGIRO go up and down completely randomly.

Pair Corralation between Iron Road and FlatexDEGIRO

Assuming the 90 days horizon Iron Road is expected to generate 4.8 times less return on investment than FlatexDEGIRO. In addition to that, Iron Road is 3.82 times more volatile than flatexDEGIRO AG. It trades about 0.01 of its total potential returns per unit of risk. flatexDEGIRO AG is currently generating about 0.14 per unit of volatility. If you would invest  1,245  in flatexDEGIRO AG on September 23, 2024 and sell it today you would earn a total of  234.00  from holding flatexDEGIRO AG or generate 18.8% return on investment over 90 days.

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

Iron Road Limited  vs.  flatexDEGIRO AG

Iron Road Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron Road Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Iron Road is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

flatexDEGIRO AG

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in flatexDEGIRO AG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, FlatexDEGIRO unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iron Road and FlatexDEGIRO

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

The idea behind Iron Road Limited and flatexDEGIRO AG 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.