Correlation Between Champion Building and Sunspring Metal
Can any of the company-specific risk be diversified away by investing in both Champion Building and Sunspring Metal 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 Champion Building and Sunspring Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Champion Building Materials and Sunspring Metal Corp, you can compare the effects of market volatilities on Champion Building and Sunspring Metal 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 Champion Building with a short position of Sunspring Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Building and Sunspring Metal.
Diversification Opportunities for Champion Building and Sunspring Metal
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Champion and Sunspring is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Champion Building Materials and Sunspring Metal Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunspring Metal Corp and Champion Building 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 Champion Building Materials are associated (or correlated) with Sunspring Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunspring Metal Corp has no effect on the direction of Champion Building i.e., Champion Building and Sunspring Metal go up and down completely randomly.
Pair Corralation between Champion Building and Sunspring Metal
Assuming the 90 days trading horizon Champion Building Materials is expected to generate 0.57 times more return on investment than Sunspring Metal. However, Champion Building Materials is 1.76 times less risky than Sunspring Metal. It trades about 0.13 of its potential returns per unit of risk. Sunspring Metal Corp is currently generating about 0.01 per unit of risk. If you would invest 996.00 in Champion Building Materials on September 1, 2024 and sell it today you would earn a total of 44.00 from holding Champion Building Materials or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Champion Building Materials vs. Sunspring Metal Corp
Performance |
| Timeline |
| Champion Building |
| Sunspring Metal Corp |
Champion Building and Sunspring Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Champion Building and Sunspring Metal
The main advantage of trading using opposite Champion Building and Sunspring Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Building position performs unexpectedly, Sunspring Metal 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 Sunspring Metal will offset losses from the drop in Sunspring Metal's long position.| Champion Building vs. China Glaze Co | Champion Building vs. Chung Hwa Pulp | Champion Building vs. Taiwan Glass Ind | Champion Building vs. China Man Made Fiber |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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