Correlation Between Legacy Iron and GreenX Metals

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

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

Diversification Opportunities for Legacy Iron and GreenX Metals

0.35

Correlation Coefficient

Legacy Iron  GreenX Metals

Weak diversification

The 3 months correlation between Legacy and GreenX is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Iron Ore and GreenX Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenX Metals and Legacy Iron 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 Legacy Iron Ore are associated (or correlated) with GreenX Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenX Metals has no effect on the direction of Legacy Iron i.e., Legacy Iron and GreenX Metals go up and down completely randomly.

Pair Corralation between Legacy Iron and GreenX Metals

Assuming the 90 days trading horizon Legacy Iron Ore is expected to generate 1.5 times more return on investment than GreenX Metals. However, Legacy Iron is 1.5 times more volatile than GreenX Metals. It trades about 0.0 of its potential returns per unit of risk. GreenX Metals is currently generating about -0.02 per unit of risk. If you would invest  1.50  in Legacy Iron Ore on September 4, 2024 and sell it today you would lose (0.40) from holding Legacy Iron Ore or give up 26.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Legacy Iron Ore  vs.  GreenX Metals

Legacy Iron Ore

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legacy Iron Ore has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

GreenX Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GreenX Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, GreenX Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Legacy Iron and GreenX Metals

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

The idea behind Legacy Iron Ore and GreenX Metals 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.