Correlation Between Legacy Iron and Commonwealth Bank
Can any of the company-specific risk be diversified away by investing in both Legacy Iron and Commonwealth Bank 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 Commonwealth Bank 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 Commonwealth Bank, you can compare the effects of market volatilities on Legacy Iron and Commonwealth Bank 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 Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legacy Iron and Commonwealth Bank.
Diversification Opportunities for Legacy Iron and Commonwealth Bank
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Legacy and Commonwealth is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Iron Ore and Commonwealth Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank 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 Commonwealth Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Bank has no effect on the direction of Legacy Iron i.e., Legacy Iron and Commonwealth Bank go up and down completely randomly.
Pair Corralation between Legacy Iron and Commonwealth Bank
Assuming the 90 days trading horizon Legacy Iron Ore is expected to under-perform the Commonwealth Bank. In addition to that, Legacy Iron is 4.77 times more volatile than Commonwealth Bank. It trades about 0.0 of its total potential returns per unit of risk. Commonwealth Bank is currently generating about 0.1 per unit of volatility. If you would invest 9,740 in Commonwealth Bank on September 12, 2024 and sell it today you would earn a total of 6,023 from holding Commonwealth Bank or generate 61.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legacy Iron Ore vs. Commonwealth Bank
Performance |
| Timeline |
| Legacy Iron Ore |
| Commonwealth Bank |
Legacy Iron and Commonwealth Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legacy Iron and Commonwealth Bank
The main advantage of trading using opposite Legacy Iron and Commonwealth Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legacy Iron position performs unexpectedly, Commonwealth Bank 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 Commonwealth Bank will offset losses from the drop in Commonwealth Bank'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 |
| Commonwealth Bank vs. Aristocrat Leisure | Commonwealth Bank vs. Hawsons Iron | Commonwealth Bank vs. Red Hill Iron | Commonwealth Bank vs. Legacy Iron Ore |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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