Correlation Between Champion Iron and L1 Long
Can any of the company-specific risk be diversified away by investing in both Champion Iron and L1 Long 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 L1 Long into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Champion Iron and L1 Long Short, you can compare the effects of market volatilities on Champion Iron and L1 Long 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 L1 Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Iron and L1 Long.
Diversification Opportunities for Champion Iron and L1 Long
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Champion and LSF is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and L1 Long Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L1 Long Short 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 L1 Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L1 Long Short has no effect on the direction of Champion Iron i.e., Champion Iron and L1 Long go up and down completely randomly.
Pair Corralation between Champion Iron and L1 Long
Assuming the 90 days trading horizon Champion Iron is expected to generate 1.49 times more return on investment than L1 Long. However, Champion Iron is 1.49 times more volatile than L1 Long Short. It trades about 0.0 of its potential returns per unit of risk. L1 Long Short is currently generating about -0.05 per unit of risk. If you would invest 576.00 in Champion Iron on September 1, 2024 and sell it today you would lose (3.00) from holding Champion Iron or give up 0.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Champion Iron vs. L1 Long Short
Performance |
| Timeline |
| Champion Iron |
| L1 Long Short |
Champion Iron and L1 Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Champion Iron and L1 Long
The main advantage of trading using opposite Champion Iron and L1 Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Iron position performs unexpectedly, L1 Long 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 L1 Long will offset losses from the drop in L1 Long's long position.| Champion Iron vs. Dicker Data | Champion Iron vs. Data3 | Champion Iron vs. Retail Food Group | Champion Iron vs. Charter Hall Retail |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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