Correlation Between Autosports and Legacy Iron
Can any of the company-specific risk be diversified away by investing in both Autosports and Legacy Iron 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 Autosports and Legacy Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Autosports Group and Legacy Iron Ore, you can compare the effects of market volatilities on Autosports and Legacy Iron 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 Autosports with a short position of Legacy Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autosports and Legacy Iron.
Diversification Opportunities for Autosports and Legacy Iron
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Autosports and Legacy is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Autosports Group and Legacy Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legacy Iron Ore and Autosports 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 Autosports Group are associated (or correlated) with Legacy Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legacy Iron Ore has no effect on the direction of Autosports i.e., Autosports and Legacy Iron go up and down completely randomly.
Pair Corralation between Autosports and Legacy Iron
Assuming the 90 days trading horizon Autosports Group is expected to generate 0.51 times more return on investment than Legacy Iron. However, Autosports Group is 1.94 times less risky than Legacy Iron. It trades about -0.05 of its potential returns per unit of risk. Legacy Iron Ore is currently generating about -0.15 per unit of risk. If you would invest 198.00 in Autosports Group on September 12, 2024 and sell it today you would lose (13.00) from holding Autosports Group or give up 6.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Autosports Group vs. Legacy Iron Ore
Performance |
| Timeline |
| Autosports Group |
| Legacy Iron Ore |
Autosports and Legacy Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Autosports and Legacy Iron
The main advantage of trading using opposite Autosports and Legacy Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autosports position performs unexpectedly, Legacy Iron 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 Legacy Iron will offset losses from the drop in Legacy Iron's long position.| Autosports vs. Toys R Us | Autosports vs. Metro Mining | Autosports vs. Carlton Investments | Autosports vs. Argo Investments |
| Legacy Iron vs. Northern Star Resources | Legacy Iron vs. Evolution Mining | Legacy Iron vs. Bluescope Steel | Legacy Iron vs. Sandfire Resources NL |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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