Correlation Between Champion Iron and Falcon Metals
Can any of the company-specific risk be diversified away by investing in both Champion Iron and Falcon Metals 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 Falcon Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Champion Iron and Falcon Metals, you can compare the effects of market volatilities on Champion Iron and Falcon Metals 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 Falcon Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Iron and Falcon Metals.
Diversification Opportunities for Champion Iron and Falcon Metals
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Champion and Falcon is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and Falcon Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Metals 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 Falcon Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Metals has no effect on the direction of Champion Iron i.e., Champion Iron and Falcon Metals go up and down completely randomly.
Pair Corralation between Champion Iron and Falcon Metals
Assuming the 90 days trading horizon Champion Iron is expected to under-perform the Falcon Metals. But the stock apears to be less risky and, when comparing its historical volatility, Champion Iron is 1.57 times less risky than Falcon Metals. The stock trades about -0.06 of its potential returns per unit of risk. The Falcon Metals is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 12.00 in Falcon Metals on November 1, 2024 and sell it today you would earn a total of 1.00 from holding Falcon Metals or generate 8.33% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Champion Iron vs. Falcon Metals
Performance |
Timeline |
Champion Iron |
Falcon Metals |
Champion Iron and Falcon Metals Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Champion Iron and Falcon Metals
The main advantage of trading using opposite Champion Iron and Falcon Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Iron position performs unexpectedly, Falcon Metals 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 Falcon Metals will offset losses from the drop in Falcon Metals' long position.Champion Iron vs. Falcon Metals | Champion Iron vs. Health and Plant | Champion Iron vs. K2 Asset Management | Champion Iron vs. MetalsGrove Mining |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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