Correlation Between Champion Iron and Nufarm Finance

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

By analyzing existing cross correlation between Champion Iron and Nufarm Finance NZ, you can compare the effects of market volatilities on Champion Iron and Nufarm Finance 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 Nufarm Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Iron and Nufarm Finance.

Diversification Opportunities for Champion Iron and Nufarm Finance

-0.39

Correlation Coefficient

Champion Iron  Nufarm Finance

Very good diversification

The 3 months correlation between Champion and Nufarm is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and Nufarm Finance NZ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Finance NZ 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 Nufarm Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Finance NZ has no effect on the direction of Champion Iron i.e., Champion Iron and Nufarm Finance go up and down completely randomly.

Pair Corralation between Champion Iron and Nufarm Finance

Assuming the 90 days trading horizon Champion Iron is expected to under-perform the Nufarm Finance. In addition to that, Champion Iron is 4.33 times more volatile than Nufarm Finance NZ. It trades about -0.05 of its total potential returns per unit of risk. Nufarm Finance NZ is currently generating about 0.01 per unit of volatility. If you would invest  9,350  in Nufarm Finance NZ on December 31, 2024 and sell it today you would earn a total of  10.00  from holding Nufarm Finance NZ or generate 0.11% return on investment over 90 days.

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

Champion Iron  vs.  Nufarm Finance NZ

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.

Nufarm Finance NZ

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nufarm Finance NZ has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nufarm Finance 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 Champion Iron and Nufarm Finance

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

The idea behind Champion Iron and Nufarm Finance NZ 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.