Correlation Between Legacy Iron and Wesfarmers
Can any of the company-specific risk be diversified away by investing in both Legacy Iron and Wesfarmers 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 Wesfarmers 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 Wesfarmers, you can compare the effects of market volatilities on Legacy Iron and Wesfarmers 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 Wesfarmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legacy Iron and Wesfarmers.
Diversification Opportunities for Legacy Iron and Wesfarmers
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Legacy and Wesfarmers is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Iron Ore and Wesfarmers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers 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 Wesfarmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesfarmers has no effect on the direction of Legacy Iron i.e., Legacy Iron and Wesfarmers go up and down completely randomly.
Pair Corralation between Legacy Iron and Wesfarmers
Assuming the 90 days trading horizon Legacy Iron Ore is expected to under-perform the Wesfarmers. In addition to that, Legacy Iron is 5.51 times more volatile than Wesfarmers. It trades about -0.24 of its total potential returns per unit of risk. Wesfarmers is currently generating about 0.36 per unit of volatility. If you would invest 6,928 in Wesfarmers on September 13, 2024 and sell it today you would earn a total of 570.00 from holding Wesfarmers or generate 8.23% 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. Wesfarmers
Performance |
| Timeline |
| Legacy Iron Ore |
| Wesfarmers |
Legacy Iron and Wesfarmers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legacy Iron and Wesfarmers
The main advantage of trading using opposite Legacy Iron and Wesfarmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legacy Iron position performs unexpectedly, Wesfarmers 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 Wesfarmers will offset losses from the drop in Wesfarmers' long position.| Legacy Iron vs. Queste Communications | Legacy Iron vs. Regal Investment | Legacy Iron vs. Clime Investment Management | Legacy Iron vs. Collins Foods |
| Wesfarmers vs. Farm Pride Foods | Wesfarmers vs. Premier Investments | Wesfarmers vs. Hotel Property Investments | Wesfarmers vs. Dicker Data |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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