Correlation Between Champion Iron and Australian Strategic
Can any of the company-specific risk be diversified away by investing in both Champion Iron and Australian Strategic 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 Iron and Australian Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Champion Iron and Australian Strategic Materials, you can compare the effects of market volatilities on Champion Iron and Australian Strategic 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 Iron with a short position of Australian Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Iron and Australian Strategic.
Diversification Opportunities for Champion Iron and Australian Strategic
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Champion and Australian is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and Australian Strategic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Strategic and Champion 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 Champion Iron are associated (or correlated) with Australian Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Strategic has no effect on the direction of Champion Iron i.e., Champion Iron and Australian Strategic go up and down completely randomly.
Pair Corralation between Champion Iron and Australian Strategic
Assuming the 90 days trading horizon Champion Iron is expected to generate 0.77 times more return on investment than Australian Strategic. However, Champion Iron is 1.3 times less risky than Australian Strategic. It trades about -0.05 of its potential returns per unit of risk. Australian Strategic Materials is currently generating about -0.07 per unit of risk. If you would invest 603.00 in Champion Iron on November 1, 2024 and sell it today you would lose (48.00) from holding Champion Iron or give up 7.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Champion Iron vs. Australian Strategic Materials
Performance |
| Timeline |
| Champion Iron |
| Australian Strategic |
Champion Iron and Australian Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Champion Iron and Australian Strategic
The main advantage of trading using opposite Champion Iron and Australian Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Iron position performs unexpectedly, Australian Strategic 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 Australian Strategic will offset losses from the drop in Australian Strategic's long position.| Champion Iron vs. Falcon Metals | Champion Iron vs. Health and Plant | Champion Iron vs. K2 Asset Management | Champion Iron vs. MetalsGrove Mining |
| Australian Strategic vs. Regis Healthcare | Australian Strategic vs. AiMedia Technologies | Australian Strategic vs. Spirit Telecom | Australian Strategic vs. Autosports Group |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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