Correlation Between Champion Iron and Western Investment
Can any of the company-specific risk be diversified away by investing in both Champion Iron and Western Investment 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 Western Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Champion Iron and Western Investment, you can compare the effects of market volatilities on Champion Iron and Western Investment 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 Western Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Iron and Western Investment.
Diversification Opportunities for Champion Iron and Western Investment
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Champion and Western is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and Western Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Investment 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 Western Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Investment has no effect on the direction of Champion Iron i.e., Champion Iron and Western Investment go up and down completely randomly.
Pair Corralation between Champion Iron and Western Investment
Assuming the 90 days trading horizon Champion Iron is expected to under-perform the Western Investment. But the stock apears to be less risky and, when comparing its historical volatility, Champion Iron is 1.67 times less risky than Western Investment. The stock trades about -0.1 of its potential returns per unit of risk. The Western Investment is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 45.00 in Western Investment on November 3, 2024 and sell it today you would earn a total of 18.00 from holding Western Investment or generate 40.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.62% |
| Values | Daily Returns |
Champion Iron vs. Western Investment
Performance |
| Timeline |
| Champion Iron |
| Western Investment |
Champion Iron and Western Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Champion Iron and Western Investment
The main advantage of trading using opposite Champion Iron and Western Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Iron position performs unexpectedly, Western Investment 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 Western Investment will offset losses from the drop in Western Investment's long position.| Champion Iron vs. Black Iron | Champion Iron vs. Wesdome Gold Mines | Champion Iron vs. GoGold Resources | Champion Iron vs. Mason Graphite |
| Western Investment vs. Canadian Utilities Limited | Western Investment vs. Marimaca Copper Corp | Western Investment vs. Champion Iron | Western Investment vs. A W FOOD |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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