Correlation Between Labrador Iron and Canlan Ice

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

Diversification Opportunities for Labrador Iron and Canlan Ice

-0.5

Correlation Coefficient

Labrador Iron  Canlan Ice

Very good diversification

The 3 months correlation between Labrador and Canlan is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Labrador Iron Ore and Canlan Ice Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canlan Ice Sports 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 Canlan Ice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canlan Ice Sports has no effect on the direction of Labrador Iron i.e., Labrador Iron and Canlan Ice go up and down completely randomly.

Pair Corralation between Labrador Iron and Canlan Ice

Assuming the 90 days trading horizon Labrador Iron is expected to generate 12.55 times less return on investment than Canlan Ice. But when comparing it to its historical volatility, Labrador Iron Ore is 1.23 times less risky than Canlan Ice. It trades about 0.01 of its potential returns per unit of risk. Canlan Ice Sports is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  377.00  in Canlan Ice Sports on September 16, 2024 and sell it today you would earn a total of  28.00  from holding Canlan Ice Sports or generate 7.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Labrador Iron Ore  vs.  Canlan Ice Sports

Labrador Iron Ore

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Labrador Iron Ore has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Labrador Iron is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Canlan Ice Sports

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Canlan Ice Sports are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Canlan Ice may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Labrador Iron and Canlan Ice

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

The idea behind Labrador Iron Ore and Canlan Ice Sports 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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..