Correlation Between FirstCash and Iris Energy

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

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

Diversification Opportunities for FirstCash and Iris Energy

-0.57

Correlation Coefficient

FirstCash  Iris Energy

Excellent diversification

The 3 months correlation between FirstCash and Iris is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding FirstCash and Iris Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iris Energy and FirstCash 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 FirstCash are associated (or correlated) with Iris Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iris Energy has no effect on the direction of FirstCash i.e., FirstCash and Iris Energy go up and down completely randomly.

Pair Corralation between FirstCash and Iris Energy

Given the investment horizon of 90 days FirstCash is expected to under-perform the Iris Energy. But the stock apears to be less risky and, when comparing its historical volatility, FirstCash is 4.81 times less risky than Iris Energy. The stock trades about -0.12 of its potential returns per unit of risk. The Iris Energy is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  793.00  in Iris Energy on September 22, 2024 and sell it today you would earn a total of  388.00  from holding Iris Energy or generate 48.93% return on investment over 90 days.

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

FirstCash  vs.  Iris Energy

FirstCash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FirstCash has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Iris Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iris Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Iris Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FirstCash and Iris Energy

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

The idea behind FirstCash and Iris Energy 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.