Correlation Between Aperam PK and Champion Iron

Can any of the company-specific risk be diversified away by investing in both Aperam PK 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 Aperam PK and Champion Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aperam PK and Champion Iron Limited, you can compare the effects of market volatilities on Aperam PK 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 Aperam PK with a short position of Champion Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aperam PK and Champion Iron.

Diversification Opportunities for Aperam PK and Champion Iron

0.29

Correlation Coefficient

Aperam PK  Champion Iron

Modest diversification

The 3 months correlation between Aperam and Champion is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Aperam PK and Champion Iron Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron Limited and Aperam PK 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 Aperam PK 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 Limited has no effect on the direction of Aperam PK i.e., Aperam PK and Champion Iron go up and down completely randomly.

Pair Corralation between Aperam PK and Champion Iron

Assuming the 90 days horizon Aperam PK is expected to generate 0.97 times more return on investment than Champion Iron. However, Aperam PK is 1.03 times less risky than Champion Iron. It trades about -0.08 of its potential returns per unit of risk. Champion Iron Limited is currently generating about -0.12 per unit of risk. If you would invest  3,100  in Aperam PK on October 5, 2024 and sell it today you would lose (477.00) from holding Aperam PK or give up 15.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Aperam PK  vs.  Champion Iron Limited

Aperam PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aperam PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Champion Iron Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Champion Iron Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Aperam PK and Champion Iron

The main advantage of trading using opposite Aperam PK and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aperam PK 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.

The idea behind Aperam PK and Champion Iron Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.