Correlation Between Ironbark Capital and Sky Metals

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

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

Diversification Opportunities for Ironbark Capital and Sky Metals

0.39

Correlation Coefficient

Ironbark Capital  Sky Metals

Weak diversification

The 3 months correlation between Ironbark and Sky is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ironbark Capital and Sky Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sky Metals and Ironbark Capital 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 Ironbark Capital are associated (or correlated) with Sky Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sky Metals has no effect on the direction of Ironbark Capital i.e., Ironbark Capital and Sky Metals go up and down completely randomly.

Pair Corralation between Ironbark Capital and Sky Metals

Assuming the 90 days trading horizon Ironbark Capital is expected to generate 11.36 times less return on investment than Sky Metals. But when comparing it to its historical volatility, Ironbark Capital is 3.92 times less risky than Sky Metals. It trades about 0.01 of its potential returns per unit of risk. Sky Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4.60  in Sky Metals on September 14, 2024 and sell it today you would earn a total of  0.90  from holding Sky Metals or generate 19.57% return on investment over 90 days.

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

Ironbark Capital  vs.  Sky Metals

Ironbark Capital

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ironbark Capital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Ironbark Capital is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Sky Metals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sky Metals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sky Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ironbark Capital and Sky Metals

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

The idea behind Ironbark Capital and Sky Metals 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.