Correlation Between Prime Financial and Legacy Iron

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

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

Diversification Opportunities for Prime Financial and Legacy Iron

0.53

Correlation Coefficient

Prime Financial  Legacy Iron

Very weak diversification

The 3 months correlation between Prime and Legacy is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Prime Financial Group and Legacy Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legacy Iron Ore and Prime Financial 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 Prime Financial Group are associated (or correlated) with Legacy Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legacy Iron Ore has no effect on the direction of Prime Financial i.e., Prime Financial and Legacy Iron go up and down completely randomly.

Pair Corralation between Prime Financial and Legacy Iron

Assuming the 90 days trading horizon Prime Financial is expected to generate 2.26 times less return on investment than Legacy Iron. But when comparing it to its historical volatility, Prime Financial Group is 1.62 times less risky than Legacy Iron. It trades about 0.04 of its potential returns per unit of risk. Legacy Iron Ore is currently generating about 0.05 of returns per unit of risk over similar time horizon. 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Prime Financial Group  vs.  Legacy Iron Ore

Prime Financial Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Financial Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Prime Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with Prime Financial and Legacy Iron

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

The idea behind Prime Financial Group and Legacy 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.

Check out your portfolio center.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.