Correlation Between Champion Iron and Highwood Asset

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

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

Diversification Opportunities for Champion Iron and Highwood Asset

-0.13

Correlation Coefficient

Champion Iron  Highwood Asset

Good diversification

The 3 months correlation between Champion and Highwood is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and Highwood Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highwood Asset Management 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 Highwood Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highwood Asset Management has no effect on the direction of Champion Iron i.e., Champion Iron and Highwood Asset go up and down completely randomly.

Pair Corralation between Champion Iron and Highwood Asset

Assuming the 90 days trading horizon Champion Iron is expected to generate 1.45 times less return on investment than Highwood Asset. But when comparing it to its historical volatility, Champion Iron is 1.05 times less risky than Highwood Asset. It trades about 0.02 of its potential returns per unit of risk. Highwood Asset Management is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  575.00  in Highwood Asset Management on October 23, 2024 and sell it today you would earn a total of  15.00  from holding Highwood Asset Management or generate 2.61% 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.  Highwood Asset Management

Champion Iron

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Champion Iron are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Champion Iron is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Highwood Asset Management

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Highwood Asset Management are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Highwood Asset is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Champion Iron and Highwood Asset

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

The idea behind Champion Iron and Highwood Asset Management 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.