Correlation Between Alto Metals and Champion Iron
Can any of the company-specific risk be diversified away by investing in both Alto Metals and Champion 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 Alto Metals and Champion Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alto Metals and Champion Iron, you can compare the effects of market volatilities on Alto Metals and Champion 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 Alto Metals with a short position of Champion Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alto Metals and Champion Iron.
Diversification Opportunities for Alto Metals and Champion Iron
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Alto and Champion is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Alto Metals and Champion Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron and Alto Metals 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 Alto Metals are associated (or correlated) with Champion Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Iron has no effect on the direction of Alto Metals i.e., Alto Metals and Champion Iron go up and down completely randomly.
Pair Corralation between Alto Metals and Champion Iron
Assuming the 90 days trading horizon Alto Metals is expected to generate 1.65 times more return on investment than Champion Iron. However, Alto Metals is 1.65 times more volatile than Champion Iron. It trades about 0.16 of its potential returns per unit of risk. Champion Iron is currently generating about -0.03 per unit of risk. If you would invest 8.10 in Alto Metals on August 31, 2024 and sell it today you would earn a total of 1.10 from holding Alto Metals or generate 13.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alto Metals vs. Champion Iron
Performance |
| Timeline |
| Alto Metals |
| Champion Iron |
Alto Metals and Champion Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alto Metals and Champion Iron
The main advantage of trading using opposite Alto Metals and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alto Metals position performs unexpectedly, Champion 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 Champion Iron will offset losses from the drop in Champion Iron's long position.| Alto Metals vs. Northern Star Resources | Alto Metals vs. Evolution Mining | Alto Metals vs. Bluescope Steel | Alto Metals vs. De Grey Mining |
| Champion Iron vs. Strickland Metals | Champion Iron vs. Centaurus Metals | Champion Iron vs. DY6 Metals | Champion Iron vs. Neurotech International |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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