Correlation Between Mount Gibson and Champion Iron
Can any of the company-specific risk be diversified away by investing in both Mount Gibson 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 Mount Gibson and Champion Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mount Gibson Iron and Champion Iron, you can compare the effects of market volatilities on Mount Gibson 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 Mount Gibson with a short position of Champion Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mount Gibson and Champion Iron.
Diversification Opportunities for Mount Gibson and Champion Iron
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mount and Champion is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Mount Gibson Iron and Champion Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron and Mount Gibson 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 Mount Gibson 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 Mount Gibson i.e., Mount Gibson and Champion Iron go up and down completely randomly.
Pair Corralation between Mount Gibson and Champion Iron
Assuming the 90 days trading horizon Mount Gibson Iron is expected to under-perform the Champion Iron. In addition to that, Mount Gibson is 1.2 times more volatile than Champion Iron. It trades about -0.02 of its total potential returns per unit of risk. Champion Iron is currently generating about -0.01 per unit of volatility. If you would invest 717.00 in Champion Iron on November 9, 2024 and sell it today you would lose (176.00) from holding Champion Iron or give up 24.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mount Gibson Iron vs. Champion Iron
Performance |
| Timeline |
| Mount Gibson Iron |
| Champion Iron |
Mount Gibson and Champion Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mount Gibson and Champion Iron
The main advantage of trading using opposite Mount Gibson and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mount Gibson 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.| Mount Gibson vs. Nine Entertainment Co | Mount Gibson vs. Dexus Convenience Retail | Mount Gibson vs. Retail Food Group | Mount Gibson vs. Collins Foods |
| Champion Iron vs. Evolution Mining | Champion Iron vs. Bluescope Steel | Champion Iron vs. Perseus Mining | Champion Iron vs. Peel Mining |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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