Correlation Between Syrah Resources and Labrador Iron

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

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

Diversification Opportunities for Syrah Resources and Labrador Iron

0.71

Correlation Coefficient

Syrah Resources  Labrador Iron

Poor diversification

The 3 months correlation between Syrah and Labrador is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Syrah Resources 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 Syrah Resources 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 Syrah Resources 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 Syrah Resources i.e., Syrah Resources and Labrador Iron go up and down completely randomly.

Pair Corralation between Syrah Resources and Labrador Iron

Assuming the 90 days horizon Syrah Resources Limited is expected to generate 5.45 times more return on investment than Labrador Iron. However, Syrah Resources is 5.45 times more volatile than Labrador Iron Ore. It trades about 0.01 of its potential returns per unit of risk. Labrador Iron Ore is currently generating about -0.01 per unit of risk. If you would invest  32.00  in Syrah Resources Limited on October 5, 2024 and sell it today you would lose (18.00) from holding Syrah Resources Limited or give up 56.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.68%
Values	Daily Returns

Syrah Resources Limited  vs.  Labrador Iron Ore

Syrah Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Syrah Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile 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.

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 fragile 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 Syrah Resources and Labrador Iron

The main advantage of trading using opposite Syrah Resources and Labrador Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Syrah Resources 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 Syrah Resources 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.