Correlation Between Tree Island and Labrador Iron
Can any of the company-specific risk be diversified away by investing in both Tree Island and Labrador 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 Tree Island and Labrador Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tree Island Steel and Labrador Iron Ore, you can compare the effects of market volatilities on Tree Island and Labrador 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 Tree Island with a short position of Labrador Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tree Island and Labrador Iron.
Diversification Opportunities for Tree Island and Labrador Iron
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Tree and Labrador is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Tree Island Steel and Labrador Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Labrador Iron Ore and Tree Island 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 Tree Island Steel are associated (or correlated) with Labrador Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Labrador Iron Ore has no effect on the direction of Tree Island i.e., Tree Island and Labrador Iron go up and down completely randomly.
Pair Corralation between Tree Island and Labrador Iron
Assuming the 90 days trading horizon Tree Island Steel is expected to generate 2.83 times more return on investment than Labrador Iron. However, Tree Island is 2.83 times more volatile than Labrador Iron Ore. It trades about 0.13 of its potential returns per unit of risk. Labrador Iron Ore is currently generating about -0.09 per unit of risk. If you would invest 286.00 in Tree Island Steel on September 1, 2024 and sell it today you would earn a total of 25.00 from holding Tree Island Steel or generate 8.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tree Island Steel vs. Labrador Iron Ore
Performance |
| Timeline |
| Tree Island Steel |
| Labrador Iron Ore |
Tree Island and Labrador Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tree Island and Labrador Iron
The main advantage of trading using opposite Tree Island and Labrador Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tree Island position performs unexpectedly, Labrador 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 Labrador Iron will offset losses from the drop in Labrador Iron's long position.| Tree Island vs. Supremex | Tree Island vs. Conifex Timber | Tree Island vs. Exco Technologies Limited | Tree Island vs. Taiga Building Products |
| Labrador Iron vs. Keyera Corp | Labrador Iron vs. Russel Metals | Labrador Iron vs. Freehold Royalties | Labrador Iron vs. Capital Power |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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