Correlation Between Champion Iron and Mount Gibson
Can any of the company-specific risk be diversified away by investing in both Champion Iron and Mount Gibson 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 Mount Gibson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Champion Iron and Mount Gibson Iron, you can compare the effects of market volatilities on Champion Iron and Mount Gibson 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 Mount Gibson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Iron and Mount Gibson.
Diversification Opportunities for Champion Iron and Mount Gibson
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Champion and Mount is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and Mount Gibson Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mount Gibson Iron 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 Mount Gibson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mount Gibson Iron has no effect on the direction of Champion Iron i.e., Champion Iron and Mount Gibson go up and down completely randomly.
Pair Corralation between Champion Iron and Mount Gibson
Assuming the 90 days trading horizon Champion Iron is expected to generate 1.26 times more return on investment than Mount Gibson. However, Champion Iron is 1.26 times more volatile than Mount Gibson Iron. It trades about -0.06 of its potential returns per unit of risk. Mount Gibson Iron is currently generating about -0.14 per unit of risk. If you would invest 576.00 in Champion Iron on August 25, 2024 and sell it today you would lose (23.00) from holding Champion Iron or give up 3.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Champion Iron vs. Mount Gibson Iron
Performance |
| Timeline |
| Champion Iron |
| Mount Gibson Iron |
Champion Iron and Mount Gibson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Champion Iron and Mount Gibson
The main advantage of trading using opposite Champion Iron and Mount Gibson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Iron position performs unexpectedly, Mount Gibson 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 Mount Gibson will offset losses from the drop in Mount Gibson's long position.| Champion Iron vs. Eagle Mountain Mining | Champion Iron vs. Charter Hall Education | Champion Iron vs. Kip McGrath Education | Champion Iron vs. Mayfield Childcare |
| Mount Gibson vs. Bisalloy Steel Group | Mount Gibson vs. AiMedia Technologies | Mount Gibson vs. Skycity Entertainment Group | Mount Gibson vs. Red Hill Iron |
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 Stocks Directory module to find actively traded stocks across global markets.
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