Correlation Between Legacy Iron and Aeris Environmental
Can any of the company-specific risk be diversified away by investing in both Legacy Iron and Aeris Environmental 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 Aeris Environmental 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 Aeris Environmental, you can compare the effects of market volatilities on Legacy Iron and Aeris Environmental 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 Aeris Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legacy Iron and Aeris Environmental.
Diversification Opportunities for Legacy Iron and Aeris Environmental
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Legacy and Aeris is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Iron Ore and Aeris Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeris Environmental 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 Aeris Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeris Environmental has no effect on the direction of Legacy Iron i.e., Legacy Iron and Aeris Environmental go up and down completely randomly.
Pair Corralation between Legacy Iron and Aeris Environmental
Assuming the 90 days trading horizon Legacy Iron Ore is expected to under-perform the Aeris Environmental. In addition to that, Legacy Iron is 1.27 times more volatile than Aeris Environmental. It trades about -0.21 of its total potential returns per unit of risk. Aeris Environmental is currently generating about 0.07 per unit of volatility. If you would invest 8.60 in Aeris Environmental on August 29, 2024 and sell it today you would earn a total of 0.40 from holding Aeris Environmental or generate 4.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Legacy Iron Ore vs. Aeris Environmental
Performance |
| Timeline |
| Legacy Iron Ore |
| Aeris Environmental |
Legacy Iron and Aeris Environmental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legacy Iron and Aeris Environmental
The main advantage of trading using opposite Legacy Iron and Aeris Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legacy Iron position performs unexpectedly, Aeris Environmental 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 Aeris Environmental will offset losses from the drop in Aeris Environmental's long position.| Legacy Iron vs. Northern Star Resources | Legacy Iron vs. Evolution Mining | Legacy Iron vs. Bluescope Steel | Legacy Iron vs. Sandfire Resources NL |
| Aeris Environmental vs. Aneka Tambang Tbk | Aeris Environmental vs. ANZ Group Holdings | Aeris Environmental vs. Australia and New | Aeris Environmental vs. Commonwealth Bank |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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