Correlation Between Leonardo DRS, and Champion Iron

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

By analyzing existing cross correlation between Leonardo DRS, Common and Champion Iron Limited, you can compare the effects of market volatilities on Leonardo DRS, and Champion Iron 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 Leonardo DRS, with a short position of Champion Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leonardo DRS, and Champion Iron.

Diversification Opportunities for Leonardo DRS, and Champion Iron

-0.34

Correlation Coefficient

Leonardo DRS,  Champion Iron

Very good diversification

The 3 months correlation between Leonardo and Champion is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Leonardo DRS, Common and Champion Iron Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron Limited and Leonardo DRS, 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 Leonardo DRS, Common are associated (or correlated) with Champion Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Iron Limited has no effect on the direction of Leonardo DRS, i.e., Leonardo DRS, and Champion Iron go up and down completely randomly.

Pair Corralation between Leonardo DRS, and Champion Iron

Considering the 90-day investment horizon Leonardo DRS, Common is expected to generate 0.68 times more return on investment than Champion Iron. However, Leonardo DRS, Common is 1.48 times less risky than Champion Iron. It trades about 0.1 of its potential returns per unit of risk. Champion Iron Limited is currently generating about 0.0 per unit of risk. If you would invest  1,311  in Leonardo DRS, Common on October 9, 2024 and sell it today you would earn a total of  1,990  from holding Leonardo DRS, Common or generate 151.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Leonardo DRS, Common  vs.  Champion Iron Limited

Leonardo DRS, Common

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Leonardo DRS, Common are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Leonardo DRS, may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 weak 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.

Pair Trading with Leonardo DRS, and Champion Iron

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

The idea behind Leonardo DRS, Common and Champion Iron Limited 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.