Correlation Between Associated British and Ironveld Plc

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

By analyzing existing cross correlation between Associated British Foods and Ironveld Plc, you can compare the effects of market volatilities on Associated British and Ironveld Plc 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 Associated British with a short position of Ironveld Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Ironveld Plc.

Diversification Opportunities for Associated British and Ironveld Plc

-0.24

Correlation Coefficient

Associated British  Ironveld Plc

Very good diversification

The 3 months correlation between Associated and Ironveld is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Ironveld Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ironveld Plc and Associated British 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 Associated British Foods are associated (or correlated) with Ironveld Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ironveld Plc has no effect on the direction of Associated British i.e., Associated British and Ironveld Plc go up and down completely randomly.

Pair Corralation between Associated British and Ironveld Plc

Assuming the 90 days trading horizon Associated British Foods is expected to under-perform the Ironveld Plc. In addition to that, Associated British is 1.21 times more volatile than Ironveld Plc. It trades about -0.27 of its total potential returns per unit of risk. Ironveld Plc is currently generating about 0.27 per unit of volatility. If you would invest  3.65  in Ironveld Plc on September 26, 2024 and sell it today you would earn a total of  0.20  from holding Ironveld Plc or generate 5.48% return on investment over 90 days.

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

Associated British Foods  vs.  Ironveld Plc

Associated British Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Ironveld Plc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ironveld Plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ironveld Plc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Associated British and Ironveld Plc

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

The idea behind Associated British Foods and Ironveld Plc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.