Correlation Between Champion Iron and Strickland Metals
Can any of the company-specific risk be diversified away by investing in both Champion Iron and Strickland 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 Strickland 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 Strickland Metals, you can compare the effects of market volatilities on Champion Iron and Strickland 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 Strickland Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Iron and Strickland Metals.
Diversification Opportunities for Champion Iron and Strickland Metals
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Champion and Strickland is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and Strickland Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strickland 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 Strickland Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strickland Metals has no effect on the direction of Champion Iron i.e., Champion Iron and Strickland Metals go up and down completely randomly.
Pair Corralation between Champion Iron and Strickland Metals
Assuming the 90 days trading horizon Champion Iron is expected to under-perform the Strickland Metals. But the stock apears to be less risky and, when comparing its historical volatility, Champion Iron is 2.52 times less risky than Strickland Metals. The stock trades about 0.0 of its potential returns per unit of risk. The Strickland Metals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4.10 in Strickland Metals on September 2, 2024 and sell it today you would earn a total of 3.90 from holding Strickland Metals or generate 95.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Champion Iron vs. Strickland Metals
Performance |
| Timeline |
| Champion Iron |
| Strickland Metals |
Champion Iron and Strickland Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Champion Iron and Strickland Metals
The main advantage of trading using opposite Champion Iron and Strickland Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Iron position performs unexpectedly, Strickland 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 Strickland Metals will offset losses from the drop in Strickland Metals' long position.| Champion Iron vs. Lendlease Group | Champion Iron vs. Fisher Paykel Healthcare | Champion Iron vs. Apiam Animal Health | Champion Iron vs. Singular Health Group |
| Strickland Metals vs. Northern Star Resources | Strickland Metals vs. Evolution Mining | Strickland Metals vs. Bluescope Steel | Strickland Metals vs. Sandfire Resources NL |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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