Correlation Between Hawsons Iron and Champion Iron
Can any of the company-specific risk be diversified away by investing in both Hawsons Iron 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 Hawsons Iron and Champion Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hawsons Iron and Champion Iron, you can compare the effects of market volatilities on Hawsons Iron 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 Hawsons Iron with a short position of Champion Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hawsons Iron and Champion Iron.
Diversification Opportunities for Hawsons Iron and Champion Iron
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hawsons and Champion is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Hawsons Iron and Champion Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron and Hawsons 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 Hawsons Iron 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 Hawsons Iron i.e., Hawsons Iron and Champion Iron go up and down completely randomly.
Pair Corralation between Hawsons Iron and Champion Iron
Assuming the 90 days trading horizon Hawsons Iron is expected to generate 1.59 times more return on investment than Champion Iron. However, Hawsons Iron is 1.59 times more volatile than Champion Iron. It trades about -0.04 of its potential returns per unit of risk. Champion Iron is currently generating about -0.08 per unit of risk. If you would invest 2.10 in Hawsons Iron on August 29, 2024 and sell it today you would lose (0.10) from holding Hawsons Iron or give up 4.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hawsons Iron vs. Champion Iron
Performance |
| Timeline |
| Hawsons Iron |
| Champion Iron |
Hawsons Iron and Champion Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hawsons Iron and Champion Iron
The main advantage of trading using opposite Hawsons Iron and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hawsons Iron 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.| Hawsons Iron vs. Perpetual Credit Income | Hawsons Iron vs. Kneomedia | Hawsons Iron vs. Super Retail Group | Hawsons Iron vs. BSP Financial Group |
| Champion Iron vs. Northern Star Resources | Champion Iron vs. Evolution Mining | Champion Iron vs. Bluescope Steel | Champion Iron vs. Sandfire Resources NL |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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