Correlation Between Future Generation and Champion Iron
Can any of the company-specific risk be diversified away by investing in both Future Generation and Champion Iron 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 Future Generation and Champion Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Future Generation Global and Champion Iron, you can compare the effects of market volatilities on Future Generation and Champion Iron 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 Future Generation with a short position of Champion Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Future Generation and Champion Iron.
Diversification Opportunities for Future Generation and Champion Iron
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Future and Champion is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Future Generation Global and Champion Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron and Future Generation 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 Future Generation Global are associated (or correlated) with Champion Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Iron has no effect on the direction of Future Generation i.e., Future Generation and Champion Iron go up and down completely randomly.
Pair Corralation between Future Generation and Champion Iron
Assuming the 90 days trading horizon Future Generation is expected to generate 1.07 times less return on investment than Champion Iron. But when comparing it to its historical volatility, Future Generation Global is 2.7 times less risky than Champion Iron. It trades about 0.39 of its potential returns per unit of risk. Champion Iron is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 553.00 in Champion Iron on November 27, 2024 and sell it today you would earn a total of 36.00 from holding Champion Iron or generate 6.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Future Generation Global vs. Champion Iron
Performance |
| Timeline |
| Future Generation Global |
| Champion Iron |
Future Generation and Champion Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Future Generation and Champion Iron
The main advantage of trading using opposite Future Generation and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Future Generation position performs unexpectedly, Champion Iron 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 Champion Iron will offset losses from the drop in Champion Iron's long position.| Future Generation vs. Andean Silver Limited | Future Generation vs. Pinnacle Investment Management | Future Generation vs. A1 Investments Resources | Future Generation vs. Unico Silver |
| Champion Iron vs. Clime Investment Management | Champion Iron vs. Advanced Braking Technology | Champion Iron vs. Pinnacle Investment Management | Champion Iron vs. Microequities Asset Management |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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