Correlation Between Labrador Iron and E L

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

By analyzing existing cross correlation between Labrador Iron Ore and E L Financial 3, you can compare the effects of market volatilities on Labrador Iron and E L 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 Labrador Iron with a short position of E L. Check out your portfolio center. Please also check ongoing floating volatility patterns of Labrador Iron and E L.

Diversification Opportunities for Labrador Iron and E L

-0.6

Correlation Coefficient

Labrador Iron  E L

Excellent diversification

The 3 months correlation between Labrador and ELF-PH is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Labrador Iron Ore and E L Financial 3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E L Financial and Labrador 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 Labrador Iron Ore are associated (or correlated) with E L. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E L Financial has no effect on the direction of Labrador Iron i.e., Labrador Iron and E L go up and down completely randomly.

Pair Corralation between Labrador Iron and E L

Assuming the 90 days trading horizon Labrador Iron Ore is expected to under-perform the E L. In addition to that, Labrador Iron is 3.11 times more volatile than E L Financial 3. It trades about -0.12 of its total potential returns per unit of risk. E L Financial 3 is currently generating about 0.2 per unit of volatility. If you would invest  2,256  in E L Financial 3 on May 5, 2025 and sell it today you would earn a total of  104.00  from holding E L Financial 3 or generate 4.61% return on investment over 90 days.

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

Labrador Iron Ore  vs.  E L Financial 3

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.

E L Financial

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in E L Financial 3 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, E L is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Labrador Iron and E L

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

The idea behind Labrador Iron Ore and E L Financial 3 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.