Correlation Between Champion Iron and Enbridge F

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

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

Diversification Opportunities for Champion Iron and Enbridge F

0.36

Correlation Coefficient

Champion Iron  Enbridge F

Weak diversification

The 3 months correlation between Champion and Enbridge is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and Enbridge F Cum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge F Cum 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 Enbridge F. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge F Cum has no effect on the direction of Champion Iron i.e., Champion Iron and Enbridge F go up and down completely randomly.

Pair Corralation between Champion Iron and Enbridge F

Assuming the 90 days trading horizon Champion Iron is expected to under-perform the Enbridge F. In addition to that, Champion Iron is 4.48 times more volatile than Enbridge F Cum. It trades about -0.07 of its total potential returns per unit of risk. Enbridge F Cum is currently generating about 0.1 per unit of volatility. If you would invest  1,892  in Enbridge F Cum on December 24, 2024 and sell it today you would earn a total of  55.00  from holding Enbridge F Cum or generate 2.91% return on investment over 90 days.

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

Champion Iron  vs.  Enbridge F Cum

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 unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Enbridge F Cum

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge F Cum are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Enbridge F is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Champion Iron and Enbridge F

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

The idea behind Champion Iron and Enbridge F Cum 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.