Correlation Between Labrador Iron and Oceanic Iron
Can any of the company-specific risk be diversified away by investing in both Labrador Iron and Oceanic Iron 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 Oceanic Iron 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 Oceanic Iron Ore, you can compare the effects of market volatilities on Labrador Iron and Oceanic Iron 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 Oceanic Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Labrador Iron and Oceanic Iron.
Diversification Opportunities for Labrador Iron and Oceanic Iron
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Labrador and Oceanic is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Labrador Iron Ore and Oceanic Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oceanic Iron Ore 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 Oceanic Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oceanic Iron Ore has no effect on the direction of Labrador Iron i.e., Labrador Iron and Oceanic Iron go up and down completely randomly.
Pair Corralation between Labrador Iron and Oceanic Iron
Assuming the 90 days trading horizon Labrador Iron Ore is expected to generate 0.11 times more return on investment than Oceanic Iron. However, Labrador Iron Ore is 9.11 times less risky than Oceanic Iron. It trades about -0.09 of its potential returns per unit of risk. Oceanic Iron Ore is currently generating about -0.03 per unit of risk. If you would invest 3,065 in Labrador Iron Ore on December 10, 2024 and sell it today you would lose (46.00) from holding Labrador Iron Ore or give up 1.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Labrador Iron Ore vs. Oceanic Iron Ore
Performance |
| Timeline |
| Labrador Iron Ore |
| Oceanic Iron Ore |
Labrador Iron and Oceanic Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Labrador Iron and Oceanic Iron
The main advantage of trading using opposite Labrador Iron and Oceanic Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Labrador Iron position performs unexpectedly, Oceanic Iron 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 Oceanic Iron will offset losses from the drop in Oceanic Iron's long position.| Labrador Iron vs. Keyera Corp | Labrador Iron vs. Russel Metals | Labrador Iron vs. Freehold Royalties | Labrador Iron vs. Capital Power |
| Oceanic Iron vs. Micron Technology, | Oceanic Iron vs. Altair Resources | Oceanic Iron vs. Theralase Technologies | Oceanic Iron vs. Birchtech Corp |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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