Correlation Between Champion Iron and Falcon Energy
Can any of the company-specific risk be diversified away by investing in both Champion Iron and Falcon Energy 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 Falcon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Champion Iron and Falcon Energy Materials, you can compare the effects of market volatilities on Champion Iron and Falcon Energy 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 Falcon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Iron and Falcon Energy.
Diversification Opportunities for Champion Iron and Falcon Energy
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Champion and Falcon is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and Falcon Energy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Energy Materials 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 Falcon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Energy Materials has no effect on the direction of Champion Iron i.e., Champion Iron and Falcon Energy go up and down completely randomly.
Pair Corralation between Champion Iron and Falcon Energy
Assuming the 90 days trading horizon Champion Iron is expected to generate 4.88 times less return on investment than Falcon Energy. But when comparing it to its historical volatility, Champion Iron is 1.73 times less risky than Falcon Energy. It trades about 0.01 of its potential returns per unit of risk. Falcon Energy Materials is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 60.00 in Falcon Energy Materials on November 27, 2024 and sell it today you would lose (3.00) from holding Falcon Energy Materials or give up 5.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Champion Iron vs. Falcon Energy Materials
Performance |
| Timeline |
| Champion Iron |
| Falcon Energy Materials |
Champion Iron and Falcon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Champion Iron and Falcon Energy
The main advantage of trading using opposite Champion Iron and Falcon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Iron position performs unexpectedly, Falcon Energy 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 Falcon Energy will offset losses from the drop in Falcon Energy's long position.| Champion Iron vs. Black Iron | Champion Iron vs. Wesdome Gold Mines | Champion Iron vs. GoGold Resources | Champion Iron vs. Mason Graphite |
| Falcon Energy vs. Canaf Investments | Falcon Energy vs. Medical Facilities | Falcon Energy vs. Solid Impact Investments | Falcon Energy vs. E L Financial 3 |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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