Correlation Between Andean Silver and Champion Iron

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

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

Diversification Opportunities for Andean Silver and Champion Iron

0.31

Correlation Coefficient

Andean Silver  Champion Iron

Weak diversification

The 3 months correlation between Andean and Champion is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Andean Silver Limited and Champion Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron and Andean Silver 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 Andean Silver Limited 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 Andean Silver i.e., Andean Silver and Champion Iron go up and down completely randomly.

Pair Corralation between Andean Silver and Champion Iron

Assuming the 90 days trading horizon Andean Silver Limited is expected to under-perform the Champion Iron. In addition to that, Andean Silver is 1.5 times more volatile than Champion Iron. It trades about -0.07 of its total potential returns per unit of risk. Champion Iron is currently generating about 0.02 per unit of volatility. If you would invest  566.00  in Champion Iron on September 22, 2024 and sell it today you would earn a total of  3.00  from holding Champion Iron or generate 0.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Andean Silver Limited  vs.  Champion Iron

Andean Silver Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Andean Silver Limited 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 essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Champion Iron

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Champion Iron are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Champion Iron is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Andean Silver and Champion Iron

The main advantage of trading using opposite Andean Silver and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Andean Silver 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 Andean Silver Limited and Champion Iron 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.