Correlation Between Champion Iron and Iron Road
Can any of the company-specific risk be diversified away by investing in both Champion Iron and Iron Road 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 Iron Road into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Champion Iron and Iron Road, you can compare the effects of market volatilities on Champion Iron and Iron Road 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 Iron Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Iron and Iron Road.
Diversification Opportunities for Champion Iron and Iron Road
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Champion and Iron is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and Iron Road in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron Road 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 Iron Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron Road has no effect on the direction of Champion Iron i.e., Champion Iron and Iron Road go up and down completely randomly.
Pair Corralation between Champion Iron and Iron Road
Assuming the 90 days trading horizon Champion Iron is expected to generate 0.93 times more return on investment than Iron Road. However, Champion Iron is 1.07 times less risky than Iron Road. It trades about -0.05 of its potential returns per unit of risk. Iron Road is currently generating about -0.07 per unit of risk. If you would invest 679.00 in Champion Iron on August 29, 2024 and sell it today you would lose (123.00) from holding Champion Iron or give up 18.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Champion Iron vs. Iron Road
Performance |
| Timeline |
| Champion Iron |
| Iron Road |
Champion Iron and Iron Road Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Champion Iron and Iron Road
The main advantage of trading using opposite Champion Iron and Iron Road positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Iron position performs unexpectedly, Iron Road 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 Iron Road will offset losses from the drop in Iron Road's long position.| Champion Iron vs. Northern Star Resources | Champion Iron vs. Evolution Mining | Champion Iron vs. Bluescope Steel | Champion Iron vs. Sandfire Resources NL |
| Iron Road vs. Kip McGrath Education | Iron Road vs. Metro Mining | Iron Road vs. Dexus Convenience Retail | Iron Road vs. Black Rock Mining |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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