Correlation Between Legacy Iron and Iron Road
Can any of the company-specific risk be diversified away by investing in both Legacy Iron and Iron Road 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 Iron Road 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 Iron Road, you can compare the effects of market volatilities on Legacy Iron and Iron Road 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 Iron Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legacy Iron and Iron Road.
Diversification Opportunities for Legacy Iron and Iron Road
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Legacy and Iron is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Iron Ore and Iron Road in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron Road 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 Iron Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron Road has no effect on the direction of Legacy Iron i.e., Legacy Iron and Iron Road go up and down completely randomly.
Pair Corralation between Legacy Iron and Iron Road
Assuming the 90 days trading horizon Legacy Iron Ore is expected to under-perform the Iron Road. In addition to that, Legacy Iron is 1.33 times more volatile than Iron Road. It trades about -0.24 of its total potential returns per unit of risk. Iron Road is currently generating about -0.09 per unit of volatility. If you would invest 6.50 in Iron Road on August 26, 2024 and sell it today you would lose (0.50) from holding Iron Road or give up 7.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legacy Iron Ore vs. Iron Road
Performance |
| Timeline |
| Legacy Iron Ore |
| Iron Road |
Legacy Iron and Iron Road Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legacy Iron and Iron Road
The main advantage of trading using opposite Legacy Iron and Iron Road positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legacy Iron position performs unexpectedly, Iron Road 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 Iron Road will offset losses from the drop in Iron Road'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 |
| Iron Road vs. Pinnacle Investment Management | Iron Road vs. Magellan Financial Group | Iron Road vs. National Australia Bank | Iron Road vs. Sky Metals |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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