Correlation Between Whitehaven Coal and Legacy Iron
Can any of the company-specific risk be diversified away by investing in both Whitehaven Coal and Legacy 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 Whitehaven Coal and Legacy Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Whitehaven Coal and Legacy Iron Ore, you can compare the effects of market volatilities on Whitehaven Coal and Legacy 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 Whitehaven Coal with a short position of Legacy Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Whitehaven Coal and Legacy Iron.
Diversification Opportunities for Whitehaven Coal and Legacy Iron
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Whitehaven and Legacy is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Whitehaven Coal and Legacy Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legacy Iron Ore and Whitehaven Coal 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 Whitehaven Coal are associated (or correlated) with Legacy Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legacy Iron Ore has no effect on the direction of Whitehaven Coal i.e., Whitehaven Coal and Legacy Iron go up and down completely randomly.
Pair Corralation between Whitehaven Coal and Legacy Iron
Assuming the 90 days trading horizon Whitehaven Coal is expected to generate 0.3 times more return on investment than Legacy Iron. However, Whitehaven Coal is 3.38 times less risky than Legacy Iron. It trades about -0.11 of its potential returns per unit of risk. Legacy Iron Ore is currently generating about -0.1 per unit of risk. If you would invest 682.00 in Whitehaven Coal on September 4, 2024 and sell it today you would lose (25.00) from holding Whitehaven Coal or give up 3.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Whitehaven Coal vs. Legacy Iron Ore
Performance |
| Timeline |
| Whitehaven Coal |
| Legacy Iron Ore |
Whitehaven Coal and Legacy Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Whitehaven Coal and Legacy Iron
The main advantage of trading using opposite Whitehaven Coal and Legacy Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Whitehaven Coal position performs unexpectedly, Legacy 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 Legacy Iron will offset losses from the drop in Legacy Iron's long position.| Whitehaven Coal vs. Westpac Banking | Whitehaven Coal vs. ABACUS STORAGE KING | Whitehaven Coal vs. Odyssey Energy | Whitehaven Coal vs. Summit Resources Limited |
| Legacy Iron vs. Hotel Property Investments | Legacy Iron vs. Argo Investments | Legacy Iron vs. Sandon Capital Investments | Legacy Iron vs. Steamships Trading |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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