Correlation Between Champion Iron and Coles
Can any of the company-specific risk be diversified away by investing in both Champion Iron and Coles 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 Coles into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Champion Iron and Coles Group, you can compare the effects of market volatilities on Champion Iron and Coles 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 Coles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Iron and Coles.
Diversification Opportunities for Champion Iron and Coles
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Champion and Coles is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and Coles Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coles Group 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 Coles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coles Group has no effect on the direction of Champion Iron i.e., Champion Iron and Coles go up and down completely randomly.
Pair Corralation between Champion Iron and Coles
Assuming the 90 days trading horizon Champion Iron is expected to generate 3.9 times less return on investment than Coles. In addition to that, Champion Iron is 2.66 times more volatile than Coles Group. It trades about 0.0 of its total potential returns per unit of risk. Coles Group is currently generating about 0.05 per unit of volatility. If you would invest 1,574 in Coles Group on September 12, 2024 and sell it today you would earn a total of 327.00 from holding Coles Group or generate 20.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Champion Iron vs. Coles Group
Performance |
| Timeline |
| Champion Iron |
| Coles Group |
Champion Iron and Coles Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Champion Iron and Coles
The main advantage of trading using opposite Champion Iron and Coles positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Iron position performs unexpectedly, Coles 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 Coles will offset losses from the drop in Coles' long position.| Champion Iron vs. Apiam Animal Health | Champion Iron vs. Group 6 Metals | Champion Iron vs. Black Rock Mining | Champion Iron vs. Sonic Healthcare |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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