Correlation Between Champion Iron and West Fraser
Can any of the company-specific risk be diversified away by investing in both Champion Iron and West Fraser 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 West Fraser into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Champion Iron and West Fraser Timber, you can compare the effects of market volatilities on Champion Iron and West Fraser 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 West Fraser. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Iron and West Fraser.
Diversification Opportunities for Champion Iron and West Fraser
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Champion and West is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and West Fraser Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Fraser Timber 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 West Fraser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Fraser Timber has no effect on the direction of Champion Iron i.e., Champion Iron and West Fraser go up and down completely randomly.
Pair Corralation between Champion Iron and West Fraser
Assuming the 90 days trading horizon Champion Iron is expected to under-perform the West Fraser. In addition to that, Champion Iron is 1.33 times more volatile than West Fraser Timber. It trades about -0.13 of its total potential returns per unit of risk. West Fraser Timber is currently generating about 0.07 per unit of volatility. If you would invest 13,487 in West Fraser Timber on August 29, 2024 and sell it today you would earn a total of 353.00 from holding West Fraser Timber or generate 2.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Champion Iron vs. West Fraser Timber
Performance |
| Timeline |
| Champion Iron |
| West Fraser Timber |
Champion Iron and West Fraser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Champion Iron and West Fraser
The main advantage of trading using opposite Champion Iron and West Fraser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Iron position performs unexpectedly, West Fraser 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 West Fraser will offset losses from the drop in West Fraser's long position.| Champion Iron vs. Black Iron | Champion Iron vs. Wesdome Gold Mines | Champion Iron vs. GoGold Resources | Champion Iron vs. Mason Graphite |
| West Fraser vs. Interfor Corp | West Fraser vs. Canfor | West Fraser vs. Stella Jones | West Fraser vs. Western Forest Products |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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