Correlation Between Legacy Iron and Capitol Health
Can any of the company-specific risk be diversified away by investing in both Legacy Iron and Capitol Health 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 Capitol Health 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 Capitol Health, you can compare the effects of market volatilities on Legacy Iron and Capitol Health 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 Capitol Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legacy Iron and Capitol Health.
Diversification Opportunities for Legacy Iron and Capitol Health
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Legacy and Capitol is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Iron Ore and Capitol Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitol Health 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 Capitol Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitol Health has no effect on the direction of Legacy Iron i.e., Legacy Iron and Capitol Health go up and down completely randomly.
Pair Corralation between Legacy Iron and Capitol Health
Assuming the 90 days trading horizon Legacy Iron Ore is expected to under-perform the Capitol Health. In addition to that, Legacy Iron is 1.81 times more volatile than Capitol Health. It trades about 0.0 of its total potential returns per unit of risk. Capitol Health is currently generating about 0.03 per unit of volatility. If you would invest 29.00 in Capitol Health on September 24, 2024 and sell it today you would earn a total of 10.00 from holding Capitol Health or generate 34.48% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Legacy Iron Ore vs. Capitol Health
Performance |
Timeline |
Legacy Iron Ore |
Capitol Health |
Legacy Iron and Capitol Health Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Legacy Iron and Capitol Health
The main advantage of trading using opposite Legacy Iron and Capitol Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legacy Iron position performs unexpectedly, Capitol Health 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 Capitol Health will offset losses from the drop in Capitol Health's long position.Legacy Iron vs. Northern Star Resources | Legacy Iron vs. Evolution Mining | Legacy Iron vs. Bluescope Steel | Legacy Iron vs. Aneka Tambang Tbk |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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