Correlation Between Legacy Iron and Encounter Resources
Can any of the company-specific risk be diversified away by investing in both Legacy Iron and Encounter Resources 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 Encounter Resources 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 Encounter Resources, you can compare the effects of market volatilities on Legacy Iron and Encounter Resources 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 Encounter Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legacy Iron and Encounter Resources.
Diversification Opportunities for Legacy Iron and Encounter Resources
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Legacy and Encounter is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Iron Ore and Encounter Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encounter Resources 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 Encounter Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encounter Resources has no effect on the direction of Legacy Iron i.e., Legacy Iron and Encounter Resources go up and down completely randomly.
Pair Corralation between Legacy Iron and Encounter Resources
Assuming the 90 days trading horizon Legacy Iron Ore is expected to under-perform the Encounter Resources. But the stock apears to be less risky and, when comparing its historical volatility, Legacy Iron Ore is 1.38 times less risky than Encounter Resources. The stock trades about 0.0 of its potential returns per unit of risk. The Encounter Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 16.00 in Encounter Resources on September 12, 2024 and sell it today you would earn a total of 20.00 from holding Encounter Resources or generate 125.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legacy Iron Ore vs. Encounter Resources
Performance |
| Timeline |
| Legacy Iron Ore |
| Encounter Resources |
Legacy Iron and Encounter Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legacy Iron and Encounter Resources
The main advantage of trading using opposite Legacy Iron and Encounter Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legacy Iron position performs unexpectedly, Encounter Resources 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 Encounter Resources will offset losses from the drop in Encounter Resources' long position.| Legacy Iron vs. Northern Star Resources | Legacy Iron vs. Evolution Mining | Legacy Iron vs. Bluescope Steel | Legacy Iron vs. Sandfire Resources NL |
| Encounter Resources vs. Readytech Holdings | Encounter Resources vs. Legacy Iron Ore | Encounter Resources vs. Vulcan Steel | Encounter Resources vs. Iron Road |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |