Correlation Between Usinas Siderurgicas and Labrador Iron

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

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

Diversification Opportunities for Usinas Siderurgicas and Labrador Iron

0.23

Correlation Coefficient

Usinas Siderurgicas  Labrador Iron

Modest diversification

The 3 months correlation between Usinas and Labrador is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Usinas Siderurgicas de 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 Usinas Siderurgicas 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 Usinas Siderurgicas de 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 Usinas Siderurgicas i.e., Usinas Siderurgicas and Labrador Iron go up and down completely randomly.

Pair Corralation between Usinas Siderurgicas and Labrador Iron

Assuming the 90 days horizon Usinas Siderurgicas de is expected to under-perform the Labrador Iron. In addition to that, Usinas Siderurgicas is 2.08 times more volatile than Labrador Iron Ore. It trades about -0.01 of its total potential returns per unit of risk. Labrador Iron Ore is currently generating about -0.01 per unit of volatility. If you would invest  2,402  in Labrador Iron Ore on October 9, 2024 and sell it today you would lose (316.00) from holding Labrador Iron Ore or give up 13.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.39%
Values	Daily Returns

Usinas Siderurgicas de  vs.  Labrador Iron Ore

Usinas Siderurgicas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Usinas Siderurgicas de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 weak 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.

Pair Trading with Usinas Siderurgicas and Labrador Iron

The main advantage of trading using opposite Usinas Siderurgicas and Labrador Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Usinas Siderurgicas 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 Usinas Siderurgicas de 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.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..