Correlation Between Hawsons Iron and Legacy Iron
Can any of the company-specific risk be diversified away by investing in both Hawsons Iron 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 Hawsons Iron and Legacy Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hawsons Iron and Legacy Iron Ore, you can compare the effects of market volatilities on Hawsons Iron 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 Hawsons Iron with a short position of Legacy Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hawsons Iron and Legacy Iron.
Diversification Opportunities for Hawsons Iron and Legacy Iron
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Hawsons and Legacy is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Hawsons Iron 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 Hawsons 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 Hawsons Iron 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 Hawsons Iron i.e., Hawsons Iron and Legacy Iron go up and down completely randomly.
Pair Corralation between Hawsons Iron and Legacy Iron
Assuming the 90 days trading horizon Hawsons Iron is expected to generate 0.64 times more return on investment than Legacy Iron. However, Hawsons Iron is 1.55 times less risky than Legacy Iron. It trades about -0.14 of its potential returns per unit of risk. Legacy Iron Ore is currently generating about -0.24 per unit of risk. If you would invest 2.20 in Hawsons Iron on August 25, 2024 and sell it today you would lose (0.20) from holding Hawsons Iron or give up 9.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hawsons Iron vs. Legacy Iron Ore
Performance |
| Timeline |
| Hawsons Iron |
| Legacy Iron Ore |
Hawsons Iron and Legacy Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hawsons Iron and Legacy Iron
The main advantage of trading using opposite Hawsons Iron and Legacy Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hawsons Iron 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.| Hawsons Iron vs. Northern Star Resources | Hawsons Iron vs. Evolution Mining | Hawsons Iron vs. Bluescope Steel | Hawsons Iron vs. Sandfire Resources NL |
| 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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