Correlation Between Macmahon Holdings and Labrador Iron

Can any of the company-specific risk be diversified away by investing in both Macmahon Holdings and Labrador 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 Macmahon Holdings and Labrador Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Macmahon Holdings Limited and Labrador Iron Ore, you can compare the effects of market volatilities on Macmahon Holdings and Labrador 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 Macmahon Holdings with a short position of Labrador Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macmahon Holdings and Labrador Iron.

Diversification Opportunities for Macmahon Holdings and Labrador Iron

0.5

Correlation Coefficient

Macmahon Holdings  Labrador Iron

Very weak diversification

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

Pair Corralation between Macmahon Holdings and Labrador Iron

Assuming the 90 days horizon Macmahon Holdings Limited is expected to under-perform the Labrador Iron. In addition to that, Macmahon Holdings is 2.15 times more volatile than Labrador Iron Ore. It trades about -0.22 of its total potential returns per unit of risk. Labrador Iron Ore is currently generating about -0.15 per unit of volatility. If you would invest  2,108  in Labrador Iron Ore on October 7, 2024 and sell it today you would lose (80.00) from holding Labrador Iron Ore or give up 3.8% of portfolio value over 90 days.

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

Macmahon Holdings Limited  vs.  Labrador Iron Ore

Macmahon Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Macmahon Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Macmahon Holdings and Labrador Iron

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

The idea behind Macmahon Holdings Limited and Labrador Iron Ore 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.