Correlation Between Mako Mining and Labrador Iron

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

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

Diversification Opportunities for Mako Mining and Labrador Iron

0.39

Correlation Coefficient

Mako Mining  Labrador Iron

Weak diversification

The 3 months correlation between Mako and Labrador is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Mako Mining 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 Mako Mining 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 Mako Mining 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 Mako Mining i.e., Mako Mining and Labrador Iron go up and down completely randomly.

Pair Corralation between Mako Mining and Labrador Iron

Assuming the 90 days horizon Mako Mining Corp is expected to generate 1.75 times more return on investment than Labrador Iron. However, Mako Mining is 1.75 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  300.00  in Mako Mining Corp on September 15, 2024 and sell it today you would lose (1.00) from holding Mako Mining Corp or give up 0.33% of portfolio value over 90 days.

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

Mako Mining Corp  vs.  Labrador Iron Ore

Mako Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mako Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Mako Mining is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated 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. 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 Mako Mining and Labrador Iron

The main advantage of trading using opposite Mako Mining and Labrador Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mako Mining 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 Mako Mining 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.