Correlation Between Champion Iron and North American

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

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

Diversification Opportunities for Champion Iron and North American

0.75

Correlation Coefficient

Champion Iron  North American

Poor diversification

The 3 months correlation between Champion and North is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of Champion Iron i.e., Champion Iron and North American go up and down completely randomly.

Pair Corralation between Champion Iron and North American

Assuming the 90 days trading horizon Champion Iron is expected to under-perform the North American. In addition to that, Champion Iron is 1.05 times more volatile than North American Financial. It trades about -0.08 of its total potential returns per unit of risk. North American Financial is currently generating about -0.07 per unit of volatility. If you would invest  677.00  in North American Financial on December 30, 2024 and sell it today you would lose (65.00) from holding North American Financial or give up 9.6% 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.  North American Financial

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.

North American Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days North American Financial 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.

Pair Trading with Champion Iron and North American

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

The idea behind Champion Iron and North American Financial 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.