Correlation Between All Iron and Home Capital

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

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

Diversification Opportunities for All Iron and Home Capital

0.29

Correlation Coefficient

All Iron  Home Capital

Modest diversification

The 3 months correlation between All and Home is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding All Iron Re and Home Capital Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Capital Rentals and All Iron 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 All Iron Re are associated (or correlated) with Home Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Capital Rentals has no effect on the direction of All Iron i.e., All Iron and Home Capital go up and down completely randomly.

Pair Corralation between All Iron and Home Capital

Assuming the 90 days trading horizon All Iron Re is expected to generate 1.01 times more return on investment than Home Capital. However, All Iron is 1.01 times more volatile than Home Capital Rentals. It trades about 0.15 of its potential returns per unit of risk. Home Capital Rentals is currently generating about -0.05 per unit of risk. If you would invest  1,120  in All Iron Re on April 24, 2025 and sell it today you would earn a total of  120.00  from holding All Iron Re or generate 10.71% return on investment over 90 days.

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

All Iron Re  vs.  Home Capital Rentals

All Iron Re

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in All Iron Re are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, All Iron may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Home Capital Rentals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Home Capital Rentals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Home Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with All Iron and Home Capital

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

The idea behind All Iron Re and Home Capital Rentals 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.