Correlation Between Champion Iron and Step One
Can any of the company-specific risk be diversified away by investing in both Champion Iron and Step One 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 Step One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Champion Iron and Step One Clothing, you can compare the effects of market volatilities on Champion Iron and Step One 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 Step One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Iron and Step One.
Diversification Opportunities for Champion Iron and Step One
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Champion and Step is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and Step One Clothing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Step One Clothing 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 Step One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Step One Clothing has no effect on the direction of Champion Iron i.e., Champion Iron and Step One go up and down completely randomly.
Pair Corralation between Champion Iron and Step One
Assuming the 90 days trading horizon Champion Iron is expected to under-perform the Step One. But the stock apears to be less risky and, when comparing its historical volatility, Champion Iron is 1.02 times less risky than Step One. The stock trades about -0.16 of its potential returns per unit of risk. The Step One Clothing is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 121.00 in Step One Clothing on November 6, 2024 and sell it today you would earn a total of 4.00 from holding Step One Clothing or generate 3.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Champion Iron vs. Step One Clothing
Performance |
| Timeline |
| Champion Iron |
| Step One Clothing |
Champion Iron and Step One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Champion Iron and Step One
The main advantage of trading using opposite Champion Iron and Step One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Iron position performs unexpectedly, Step One 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 Step One will offset losses from the drop in Step One's long position.| Champion Iron vs. EVE Health Group | Champion Iron vs. Qbe Insurance Group | Champion Iron vs. Event Hospitality and | Champion Iron vs. Chalice Mining Limited |
| Step One vs. Chalice Mining Limited | Step One vs. Ras Technology Holdings | Step One vs. Australian Agricultural | Step One vs. Centuria Industrial Reit |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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