Correlation Between Legacy Iron and IXUP

Can any of the company-specific risk be diversified away by investing in both Legacy Iron and IXUP 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 IXUP 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 IXUP, you can compare the effects of market volatilities on Legacy Iron and IXUP 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 IXUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legacy Iron and IXUP.

Diversification Opportunities for Legacy Iron and IXUP

-0.31

Correlation Coefficient

Legacy Iron  IXUP

Very good diversification

The 3 months correlation between Legacy and IXUP is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Iron Ore and IXUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IXUP 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 IXUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IXUP has no effect on the direction of Legacy Iron i.e., Legacy Iron and IXUP go up and down completely randomly.

Pair Corralation between Legacy Iron and IXUP

Assuming the 90 days trading horizon Legacy Iron Ore is expected to generate 0.59 times more return on investment than IXUP. However, Legacy Iron Ore is 1.71 times less risky than IXUP. It trades about 0.05 of its potential returns per unit of risk. IXUP is currently generating about -0.02 per unit of risk. If you would invest  1.00  in Legacy Iron Ore on December 29, 2024 and sell it today you would earn a total of  0.10  from holding Legacy Iron Ore or generate 10.0% 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.  IXUP

Legacy Iron Ore

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Legacy Iron Ore are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Legacy Iron unveiled solid returns over the last few months and may actually be approaching a breakup point.

IXUP

Risk-Adjusted Performance

Very Weak

Over the last 90 days IXUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Legacy Iron and IXUP

The main advantage of trading using opposite Legacy Iron and IXUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legacy Iron position performs unexpectedly, IXUP 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 IXUP will offset losses from the drop in IXUP's long position.

The idea behind Legacy Iron Ore and IXUP pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.