Correlation Between Legacy Iron and Collins Foods
Can any of the company-specific risk be diversified away by investing in both Legacy Iron and Collins Foods 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 Collins Foods 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 Collins Foods, you can compare the effects of market volatilities on Legacy Iron and Collins Foods 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 Collins Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legacy Iron and Collins Foods.
Diversification Opportunities for Legacy Iron and Collins Foods
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legacy and Collins is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Iron Ore and Collins Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collins Foods 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 Collins Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collins Foods has no effect on the direction of Legacy Iron i.e., Legacy Iron and Collins Foods go up and down completely randomly.
Pair Corralation between Legacy Iron and Collins Foods
Assuming the 90 days trading horizon Legacy Iron Ore is expected to generate 1.94 times more return on investment than Collins Foods. However, Legacy Iron is 1.94 times more volatile than Collins Foods. It trades about 0.11 of its potential returns per unit of risk. Collins Foods is currently generating about 0.19 per unit of risk. If you would invest 0.90 in Legacy Iron Ore on December 1, 2024 and sell it today you would earn a total of 0.10 from holding Legacy Iron Ore or generate 11.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legacy Iron Ore vs. Collins Foods
Performance |
| Timeline |
| Legacy Iron Ore |
| Collins Foods |
Legacy Iron and Collins Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legacy Iron and Collins Foods
The main advantage of trading using opposite Legacy Iron and Collins Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legacy Iron position performs unexpectedly, Collins Foods 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 Collins Foods will offset losses from the drop in Collins Foods' long position.| Legacy Iron vs. Kkr Credit Income | Legacy Iron vs. Commonwealth Bank of | Legacy Iron vs. Bank of Queensland | Legacy Iron vs. Macquarie Bank Limited |
| Collins Foods vs. Retail Food Group | Collins Foods vs. My Foodie Box | Collins Foods vs. Sonic Healthcare | Collins Foods vs. Energy Technologies Limited |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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