Correlation Between Labrador Iron and Monument Mining

Can any of the company-specific risk be diversified away by investing in both Labrador Iron and Monument Mining 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 Monument Mining 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 Monument Mining Limited, you can compare the effects of market volatilities on Labrador Iron and Monument Mining 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 Monument Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Labrador Iron and Monument Mining.

Diversification Opportunities for Labrador Iron and Monument Mining

0.41

Correlation Coefficient

Labrador Iron  Monument Mining

Very weak diversification

The 3 months correlation between Labrador and Monument is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Labrador Iron Ore and Monument Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monument Mining 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 Monument Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monument Mining has no effect on the direction of Labrador Iron i.e., Labrador Iron and Monument Mining go up and down completely randomly.

Pair Corralation between Labrador Iron and Monument Mining

Assuming the 90 days trading horizon Labrador Iron Ore is expected to generate 0.37 times more return on investment than Monument Mining. However, Labrador Iron Ore is 2.68 times less risky than Monument Mining. It trades about -0.03 of its potential returns per unit of risk. Monument Mining Limited is currently generating about -0.01 per unit of risk. If you would invest  2,893  in Labrador Iron Ore on April 24, 2025 and sell it today you would lose (63.00) from holding Labrador Iron Ore or give up 2.18% of portfolio value over 90 days.

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

Labrador Iron Ore  vs.  Monument Mining Limited

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 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.

Monument Mining

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Labrador Iron and Monument Mining

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

The idea behind Labrador Iron Ore and Monument Mining Limited 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.