Correlation Between Champion Iron and Scottie Resources

Can any of the company-specific risk be diversified away by investing in both Champion Iron and Scottie 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 Scottie 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 Scottie Resources Corp, you can compare the effects of market volatilities on Champion Iron and Scottie 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 Scottie Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Iron and Scottie Resources.

Diversification Opportunities for Champion Iron and Scottie Resources

-0.12

Correlation Coefficient

Champion Iron  Scottie Resources

Good diversification

The 3 months correlation between Champion and Scottie is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and Scottie Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scottie Resources Corp 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 Scottie Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scottie Resources Corp has no effect on the direction of Champion Iron i.e., Champion Iron and Scottie Resources go up and down completely randomly.

Pair Corralation between Champion Iron and Scottie Resources

Assuming the 90 days trading horizon Champion Iron is expected to under-perform the Scottie Resources. But the stock apears to be less risky and, when comparing its historical volatility, Champion Iron is 2.36 times less risky than Scottie Resources. The stock trades about -0.05 of its potential returns per unit of risk. The Scottie Resources Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  99.00  in Scottie Resources Corp on December 1, 2024 and sell it today you would lose (9.00) from holding Scottie Resources Corp or give up 9.09% of portfolio value over 90 days.

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

Champion Iron  vs.  Scottie Resources Corp

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.

Scottie Resources Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Scottie Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Scottie Resources is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Champion Iron and Scottie Resources

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

The idea behind Champion Iron and Scottie Resources Corp 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 Anywhere module to track or share privately all of your investments from the convenience of any device.