Correlation Between Champion Iron and Rumble Resources

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

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

Diversification Opportunities for Champion Iron and Rumble Resources

0.66

Correlation Coefficient

Champion Iron  Rumble Resources

Poor diversification

The 3 months correlation between Champion and Rumble is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and Rumble Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rumble Resources 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 Rumble Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rumble Resources has no effect on the direction of Champion Iron i.e., Champion Iron and Rumble Resources go up and down completely randomly.

Pair Corralation between Champion Iron and Rumble Resources

Assuming the 90 days trading horizon Champion Iron is expected to generate 0.61 times more return on investment than Rumble Resources. However, Champion Iron is 1.65 times less risky than Rumble Resources. It trades about -0.06 of its potential returns per unit of risk. Rumble Resources is currently generating about -0.07 per unit of risk. If you would invest  579.00  in Champion Iron on December 22, 2024 and sell it today you would lose (59.00) from holding Champion Iron or give up 10.19% of portfolio value over 90 days.

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

Champion Iron  vs.  Rumble Resources

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.

Rumble Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rumble Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Champion Iron and Rumble Resources

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

The idea behind Champion Iron and Rumble Resources 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.