Correlation Between Champion Iron and Aperam PK

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

Diversification Opportunities for Champion Iron and Aperam PK

0.29

Correlation Coefficient

Champion Iron  Aperam PK

Modest diversification

The 3 months correlation between Champion and Aperam is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron Limited and Aperam PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aperam PK 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 Aperam PK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aperam PK has no effect on the direction of Champion Iron i.e., Champion Iron and Aperam PK go up and down completely randomly.

Pair Corralation between Champion Iron and Aperam PK

Assuming the 90 days horizon Champion Iron Limited is expected to generate 0.68 times more return on investment than Aperam PK. However, Champion Iron Limited is 1.47 times less risky than Aperam PK. It trades about -0.16 of its potential returns per unit of risk. Aperam PK is currently generating about -0.16 per unit of risk. If you would invest  386.00  in Champion Iron Limited on October 5, 2024 and sell it today you would lose (25.00) from holding Champion Iron Limited or give up 6.48% of portfolio value over 90 days.

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

Champion Iron Limited  vs.  Aperam PK

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.

Aperam PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aperam PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Champion Iron and Aperam PK

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

The idea behind Champion Iron Limited and Aperam PK 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.