Correlation Between Boyd Group and Champion Iron

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

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

Diversification Opportunities for Boyd Group and Champion Iron

-0.54

Correlation Coefficient

Boyd Group  Champion Iron

Excellent diversification

The 3 months correlation between Boyd and Champion is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Boyd Group Services and Champion Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron and Boyd Group 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 Boyd Group Services 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 Boyd Group i.e., Boyd Group and Champion Iron go up and down completely randomly.

Pair Corralation between Boyd Group and Champion Iron

Assuming the 90 days trading horizon Boyd Group Services is expected to under-perform the Champion Iron. But the stock apears to be less risky and, when comparing its historical volatility, Boyd Group Services is 2.23 times less risky than Champion Iron. The stock trades about -0.04 of its potential returns per unit of risk. The Champion Iron is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  523.00  in Champion Iron on September 13, 2024 and sell it today you would earn a total of  6.00  from holding Champion Iron or generate 1.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Boyd Group Services  vs.  Champion Iron

Boyd Group Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boyd Group Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Boyd Group is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the 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 very healthy basic indicators, Champion Iron is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Boyd Group and Champion Iron

The main advantage of trading using opposite Boyd Group and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boyd Group 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 Boyd Group Services 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.