Correlation Between Champion Iron and Iluka Resources
Can any of the company-specific risk be diversified away by investing in both Champion Iron and Iluka Resources 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 Iluka Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Champion Iron and Iluka Resources, you can compare the effects of market volatilities on Champion Iron and Iluka Resources 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 Iluka Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Iron and Iluka Resources.
Diversification Opportunities for Champion Iron and Iluka Resources
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Champion and Iluka is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and Iluka Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iluka Resources 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 Iluka Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iluka Resources has no effect on the direction of Champion Iron i.e., Champion Iron and Iluka Resources go up and down completely randomly.
Pair Corralation between Champion Iron and Iluka Resources
Assuming the 90 days trading horizon Champion Iron is expected to generate 1.15 times more return on investment than Iluka Resources. However, Champion Iron is 1.15 times more volatile than Iluka Resources. It trades about -0.05 of its potential returns per unit of risk. Iluka Resources is currently generating about -0.13 per unit of risk. If you would invest 584.00 in Champion Iron on August 29, 2024 and sell it today you would lose (19.00) from holding Champion Iron or give up 3.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Champion Iron vs. Iluka Resources
Performance |
| Timeline |
| Champion Iron |
| Iluka Resources |
Champion Iron and Iluka Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Champion Iron and Iluka Resources
The main advantage of trading using opposite Champion Iron and Iluka Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Iron position performs unexpectedly, Iluka Resources 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 Iluka Resources will offset losses from the drop in Iluka Resources' long position.| Champion Iron vs. Future Generation Global | Champion Iron vs. Rubicon Water | Champion Iron vs. Kinatico | Champion Iron vs. Jade Gas Holdings |
| Iluka Resources vs. Kip McGrath Education | Iluka Resources vs. Hutchison Telecommunications | Iluka Resources vs. Charter Hall Retail | Iluka Resources vs. Iron Road |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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