Correlation Between LEGACY IRON and Takkt AG

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Can any of the company-specific risk be diversified away by investing in both LEGACY IRON and Takkt AG 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 LEGACY IRON and Takkt AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LEGACY IRON ORE and Takkt AG, you can compare the effects of market volatilities on LEGACY IRON and Takkt AG 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 LEGACY IRON with a short position of Takkt AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of LEGACY IRON and Takkt AG.

Diversification Opportunities for LEGACY IRON and Takkt AG

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between LEGACY and Takkt is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding LEGACY IRON ORE and Takkt AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Takkt AG and LEGACY 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 LEGACY IRON ORE are associated (or correlated) with Takkt AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Takkt AG has no effect on the direction of LEGACY IRON i.e., LEGACY IRON and Takkt AG go up and down completely randomly.

Pair Corralation between LEGACY IRON and Takkt AG

Assuming the 90 days trading horizon LEGACY IRON ORE is expected to generate 0.27 times more return on investment than Takkt AG. However, LEGACY IRON ORE is 3.73 times less risky than Takkt AG. It trades about -0.06 of its potential returns per unit of risk. Takkt AG is currently generating about -0.05 per unit of risk. If you would invest  1.22  in LEGACY IRON ORE on September 8, 2024 and sell it today you would lose (0.17) from holding LEGACY IRON ORE or give up 13.93% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

LEGACY IRON ORE  vs.  Takkt AG

 Performance 
       Timeline  
LEGACY IRON ORE 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days LEGACY IRON ORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
Takkt AG 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Takkt AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking signals remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

LEGACY IRON and Takkt AG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with LEGACY IRON and Takkt AG

The main advantage of trading using opposite LEGACY IRON and Takkt AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LEGACY IRON position performs unexpectedly, Takkt AG 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 Takkt AG will offset losses from the drop in Takkt AG's long position.
The idea behind LEGACY IRON ORE and Takkt AG 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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