Correlation Between Orezone Gold and Labrador Iron

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

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

Diversification Opportunities for Orezone Gold and Labrador Iron

0.72

Correlation Coefficient

Orezone Gold  Labrador Iron

Poor diversification

The 3 months correlation between Orezone and Labrador is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Orezone Gold Corp 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 Orezone Gold 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 Orezone Gold Corp 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 Orezone Gold i.e., Orezone Gold and Labrador Iron go up and down completely randomly.

Pair Corralation between Orezone Gold and Labrador Iron

Assuming the 90 days trading horizon Orezone Gold Corp is expected to under-perform the Labrador Iron. In addition to that, Orezone Gold is 2.95 times more volatile than Labrador Iron Ore. It trades about -0.06 of its total potential returns per unit of risk. Labrador Iron Ore is currently generating about 0.05 per unit of volatility. If you would invest  2,931  in Labrador Iron Ore on September 12, 2024 and sell it today you would earn a total of  102.00  from holding Labrador Iron Ore or generate 3.48% return on investment over 90 days.

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

Orezone Gold Corp  vs.  Labrador Iron Ore

Orezone Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orezone Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Labrador Iron Ore

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Labrador Iron Ore are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Orezone Gold and Labrador Iron

The main advantage of trading using opposite Orezone Gold and Labrador Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orezone Gold 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 Orezone Gold Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.