Correlation Between Iron Road and Sun Communities

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

Diversification Opportunities for Iron Road and Sun Communities

-0.36

Correlation Coefficient

Iron Road  Sun Communities

Very good diversification

The 3 months correlation between Iron and Sun is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road Limited and Sun Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Communities 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 Sun Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Communities has no effect on the direction of Iron Road i.e., Iron Road and Sun Communities go up and down completely randomly.

Pair Corralation between Iron Road and Sun Communities

Assuming the 90 days horizon Iron Road Limited is expected to generate 46.01 times more return on investment than Sun Communities. However, Iron Road is 46.01 times more volatile than Sun Communities. It trades about 0.15 of its potential returns per unit of risk. Sun Communities is currently generating about 0.05 per unit of risk. If you would invest  1.15  in Iron Road Limited on April 24, 2025 and sell it today you would lose (0.45) from holding Iron Road Limited or give up 39.13% of portfolio value over 90 days.

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

Iron Road Limited  vs.  Sun Communities

Iron Road Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Iron Road Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Iron Road reported solid returns over the last few months and may actually be approaching a breakup point.

Sun Communities

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Communities are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sun Communities is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Iron Road and Sun Communities

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

The idea behind Iron Road Limited and Sun Communities 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.