Correlation Between Champion Iron and Pure Energy

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

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

Diversification Opportunities for Champion Iron and Pure Energy

0.4

Correlation Coefficient

Champion Iron  Pure Energy

Very weak diversification

The 3 months correlation between Champion and Pure is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and Pure Energy Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Energy Minerals 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 Pure Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Energy Minerals has no effect on the direction of Champion Iron i.e., Champion Iron and Pure Energy go up and down completely randomly.

Pair Corralation between Champion Iron and Pure Energy

Assuming the 90 days trading horizon Champion Iron is expected to generate 0.56 times more return on investment than Pure Energy. However, Champion Iron is 1.77 times less risky than Pure Energy. It trades about -0.08 of its potential returns per unit of risk. Pure Energy Minerals is currently generating about -0.06 per unit of risk. If you would invest  516.00  in Champion Iron on December 29, 2024 and sell it today you would lose (60.00) from holding Champion Iron or give up 11.63% of portfolio value over 90 days.

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

Champion Iron  vs.  Pure Energy Minerals

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.

Pure Energy Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pure Energy Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Champion Iron and Pure Energy

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

The idea behind Champion Iron and Pure Energy Minerals 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.