Correlation Between Champion Iron and Macquarie Bank

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

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

Diversification Opportunities for Champion Iron and Macquarie Bank

-0.44

Correlation Coefficient

Champion Iron  Macquarie Bank

Very good diversification

The 3 months correlation between Champion and Macquarie is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and Macquarie Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Bank and Champion 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 Champion Iron are associated (or correlated) with Macquarie Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Bank has no effect on the direction of Champion Iron i.e., Champion Iron and Macquarie Bank go up and down completely randomly.

Pair Corralation between Champion Iron and Macquarie Bank

Assuming the 90 days trading horizon Champion Iron is expected to under-perform the Macquarie Bank. In addition to that, Champion Iron is 9.7 times more volatile than Macquarie Bank Limited. It trades about -0.06 of its total potential returns per unit of risk. Macquarie Bank Limited is currently generating about 0.01 per unit of volatility. If you would invest  10,246  in Macquarie Bank Limited on December 30, 2024 and sell it today you would earn a total of  8.00  from holding Macquarie Bank Limited or generate 0.08% return on investment over 90 days.

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

Champion Iron  vs.  Macquarie Bank Limited

Champion Iron

Risk-Adjusted Performance

Very Weak

Over the last 90 days Champion Iron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Macquarie Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Macquarie Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Macquarie Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Champion Iron and Macquarie Bank

The main advantage of trading using opposite Champion Iron and Macquarie Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Iron position performs unexpectedly, Macquarie Bank 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 Macquarie Bank will offset losses from the drop in Macquarie Bank's long position.

The idea behind Champion Iron and Macquarie Bank 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.