Correlation Between Labrador Iron and Geodrill

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

Diversification Opportunities for Labrador Iron and Geodrill

-0.35

Correlation Coefficient

Labrador Iron  Geodrill

Very good diversification

The 3 months correlation between Labrador and Geodrill is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Labrador Iron Ore and Geodrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geodrill Limited 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 Geodrill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geodrill Limited has no effect on the direction of Labrador Iron i.e., Labrador Iron and Geodrill go up and down completely randomly.

Pair Corralation between Labrador Iron and Geodrill

Assuming the 90 days horizon Labrador Iron Ore is expected to under-perform the Geodrill. But the pink sheet apears to be less risky and, when comparing its historical volatility, Labrador Iron Ore is 1.58 times less risky than Geodrill. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Geodrill Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  220.00  in Geodrill Limited on October 22, 2024 and sell it today you would lose (1.00) from holding Geodrill Limited or give up 0.45% of portfolio value over 90 days.

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

Labrador Iron Ore  vs.  Geodrill Limited

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Geodrill Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Geodrill Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Geodrill may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Labrador Iron and Geodrill

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

The idea behind Labrador Iron Ore and Geodrill Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.