Correlation Between Champion Iron and Acerinox

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

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

Diversification Opportunities for Champion Iron and Acerinox

0.63

Correlation Coefficient

Champion Iron  Acerinox

Poor diversification

The 3 months correlation between Champion and Acerinox is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron Limited and Acerinox SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acerinox SA ADR 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 Limited are associated (or correlated) with Acerinox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acerinox SA ADR has no effect on the direction of Champion Iron i.e., Champion Iron and Acerinox go up and down completely randomly.

Pair Corralation between Champion Iron and Acerinox

Assuming the 90 days horizon Champion Iron Limited is expected to under-perform the Acerinox. In addition to that, Champion Iron is 1.2 times more volatile than Acerinox SA ADR. It trades about -0.16 of its total potential returns per unit of risk. Acerinox SA ADR is currently generating about -0.05 per unit of volatility. If you would invest  500.00  in Acerinox SA ADR on October 5, 2024 and sell it today you would lose (10.00) from holding Acerinox SA ADR or give up 2.0% of portfolio value over 90 days.

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

Champion Iron Limited  vs.  Acerinox SA ADR

Champion Iron Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Champion Iron Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Acerinox SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acerinox SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Acerinox is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Champion Iron and Acerinox

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

The idea behind Champion Iron Limited and Acerinox SA ADR 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.