Correlation Between Iron Road and Otello ASA

Can any of the company-specific risk be diversified away by investing in both Iron Road and Otello ASA 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 Otello ASA 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 Otello ASA, you can compare the effects of market volatilities on Iron Road and Otello ASA 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 Otello ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Road and Otello ASA.

Diversification Opportunities for Iron Road and Otello ASA

-0.52

Correlation Coefficient

Iron Road  Otello ASA

Excellent diversification

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

Pair Corralation between Iron Road and Otello ASA

Assuming the 90 days horizon Iron Road Limited is expected to generate 32.36 times more return on investment than Otello ASA. However, Iron Road is 32.36 times more volatile than Otello ASA. It trades about 0.14 of its potential returns per unit of risk. Otello ASA is currently generating about 0.32 per unit of risk. If you would invest  1.05  in Iron Road Limited on April 21, 2025 and sell it today you would lose (0.65) from holding Iron Road Limited or give up 61.9% of portfolio value over 90 days.

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

Iron Road Limited  vs.  Otello ASA

Iron Road Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iron Road Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Iron Road reported solid returns over the last few months and may actually be approaching a breakup point.

Otello ASA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Otello ASA are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Otello ASA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iron Road and Otello ASA

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

The idea behind Iron Road Limited and Otello ASA 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.