Correlation Between Labrador Iron and Canadian Utilities
Can any of the company-specific risk be diversified away by investing in both Labrador Iron and Canadian Utilities 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 Labrador Iron and Canadian Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Labrador Iron Ore and Canadian Utilities Ltd, you can compare the effects of market volatilities on Labrador Iron and Canadian Utilities 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 Labrador Iron with a short position of Canadian Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Labrador Iron and Canadian Utilities.
Diversification Opportunities for Labrador Iron and Canadian Utilities
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Labrador and Canadian is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Labrador Iron Ore and Canadian Utilities Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities and Labrador 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 Labrador Iron Ore are associated (or correlated) with Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of Labrador Iron i.e., Labrador Iron and Canadian Utilities go up and down completely randomly.
Pair Corralation between Labrador Iron and Canadian Utilities
Assuming the 90 days trading horizon Labrador Iron is expected to generate 1.68 times less return on investment than Canadian Utilities. In addition to that, Labrador Iron is 1.65 times more volatile than Canadian Utilities Ltd. It trades about 0.02 of its total potential returns per unit of risk. Canadian Utilities Ltd is currently generating about 0.04 per unit of volatility. If you would invest 1,871 in Canadian Utilities Ltd on September 12, 2024 and sell it today you would earn a total of 354.00 from holding Canadian Utilities Ltd or generate 18.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Labrador Iron Ore vs. Canadian Utilities Ltd
Performance |
| Timeline |
| Labrador Iron Ore |
| Canadian Utilities |
Labrador Iron and Canadian Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Labrador Iron and Canadian Utilities
The main advantage of trading using opposite Labrador Iron and Canadian Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Labrador Iron position performs unexpectedly, Canadian Utilities 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 Canadian Utilities will offset losses from the drop in Canadian Utilities' long position.| Labrador Iron vs. Keyera Corp | Labrador Iron vs. Russel Metals | Labrador Iron vs. Freehold Royalties | Labrador Iron vs. Capital Power |
| Canadian Utilities vs. Wilmington Capital Management | Canadian Utilities vs. Faction Investment Group | Canadian Utilities vs. Verizon Communications CDR | Canadian Utilities vs. Upstart Investments |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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