Correlation Between Freehold Royalties and Labrador Iron

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

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

Diversification Opportunities for Freehold Royalties and Labrador Iron

-0.65

Correlation Coefficient

Freehold Royalties  Labrador Iron

Excellent diversification

The 3 months correlation between Freehold and Labrador is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Freehold Royalties 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 Freehold Royalties 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 Freehold Royalties 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 Freehold Royalties i.e., Freehold Royalties and Labrador Iron go up and down completely randomly.

Pair Corralation between Freehold Royalties and Labrador Iron

Assuming the 90 days trading horizon Freehold Royalties is expected to generate 1.13 times more return on investment than Labrador Iron. However, Freehold Royalties is 1.13 times more volatile than Labrador Iron Ore. It trades about 0.24 of its potential returns per unit of risk. Labrador Iron Ore is currently generating about -0.12 per unit of risk. If you would invest  1,089  in Freehold Royalties on May 4, 2025 and sell it today you would earn a total of  212.00  from holding Freehold Royalties or generate 19.47% return on investment over 90 days.

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

Freehold Royalties  vs.  Labrador Iron Ore

Freehold Royalties

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Freehold Royalties are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Freehold Royalties displayed solid returns over the last few months and may actually be approaching a breakup point.

Labrador Iron Ore

Risk-Adjusted Performance

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Freehold Royalties and Labrador Iron

The main advantage of trading using opposite Freehold Royalties and Labrador Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freehold Royalties 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 Freehold Royalties 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.