Correlation Between Legacy Iron and Strickland Metals
Can any of the company-specific risk be diversified away by investing in both Legacy Iron and Strickland Metals 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 Strickland Metals 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 Strickland Metals, you can compare the effects of market volatilities on Legacy Iron and Strickland Metals 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 Strickland Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legacy Iron and Strickland Metals.
Diversification Opportunities for Legacy Iron and Strickland Metals
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Legacy and Strickland is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Iron Ore and Strickland Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strickland Metals 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 Strickland Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strickland Metals has no effect on the direction of Legacy Iron i.e., Legacy Iron and Strickland Metals go up and down completely randomly.
Pair Corralation between Legacy Iron and Strickland Metals
Assuming the 90 days trading horizon Legacy Iron Ore is expected to under-perform the Strickland Metals. But the stock apears to be less risky and, when comparing its historical volatility, Legacy Iron Ore is 1.06 times less risky than Strickland Metals. The stock trades about -0.04 of its potential returns per unit of risk. The Strickland Metals is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 10.00 in Strickland Metals on September 3, 2024 and sell it today you would lose (2.00) from holding Strickland Metals or give up 20.0% 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. Strickland Metals
Performance |
| Timeline |
| Legacy Iron Ore |
| Strickland Metals |
Legacy Iron and Strickland Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legacy Iron and Strickland Metals
The main advantage of trading using opposite Legacy Iron and Strickland Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legacy Iron position performs unexpectedly, Strickland Metals 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 Strickland Metals will offset losses from the drop in Strickland Metals' long position.| Legacy Iron vs. Northern Star Resources | Legacy Iron vs. Evolution Mining | Legacy Iron vs. Bluescope Steel | Legacy Iron vs. Aneka Tambang Tbk |
| Strickland Metals vs. Northern Star Resources | Strickland Metals vs. Evolution Mining | Strickland Metals vs. Bluescope Steel | Strickland Metals vs. Aneka Tambang Tbk |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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