Correlation Between Falcon Metals and Legacy Iron
Can any of the company-specific risk be diversified away by investing in both Falcon Metals 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 Falcon Metals and Legacy Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Falcon Metals and Legacy Iron Ore, you can compare the effects of market volatilities on Falcon Metals 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 Falcon Metals with a short position of Legacy Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Metals and Legacy Iron.
Diversification Opportunities for Falcon Metals and Legacy Iron
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Falcon and Legacy is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Metals 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 Falcon Metals 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 Falcon Metals 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 Falcon Metals i.e., Falcon Metals and Legacy Iron go up and down completely randomly.
Pair Corralation between Falcon Metals and Legacy Iron
Assuming the 90 days trading horizon Falcon Metals is expected to under-perform the Legacy Iron. But the stock apears to be less risky and, when comparing its historical volatility, Falcon Metals is 1.11 times less risky than Legacy Iron. The stock trades about -0.18 of its potential returns per unit of risk. The Legacy Iron Ore is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 1.00 in Legacy Iron Ore on October 10, 2024 and sell it today you would lose (0.10) from holding Legacy Iron Ore or give up 10.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Falcon Metals vs. Legacy Iron Ore
Performance |
| Timeline |
| Falcon Metals |
| Legacy Iron Ore |
Falcon Metals and Legacy Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Falcon Metals and Legacy Iron
The main advantage of trading using opposite Falcon Metals and Legacy Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcon Metals 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.| Falcon Metals vs. Northern Star Resources | Falcon Metals vs. Evolution Mining | Falcon Metals vs. Bluescope Steel | Falcon Metals vs. De Grey Mining |
| Legacy Iron vs. Bluescope Steel | Legacy Iron vs. Event Hospitality and | Legacy Iron vs. Mount Gibson Iron | Legacy Iron vs. Collins Foods |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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