Correlation Between Essilor International and Champion Iron

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

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

Diversification Opportunities for Essilor International and Champion Iron

-0.3

Correlation Coefficient

Essilor International  Champion Iron

Very good diversification

The 3 months correlation between Essilor and Champion is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Essilor International SA 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 Essilor International 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 Essilor International SA 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 Essilor International i.e., Essilor International and Champion Iron go up and down completely randomly.

Pair Corralation between Essilor International and Champion Iron

Assuming the 90 days horizon Essilor International SA is expected to generate 0.3 times more return on investment than Champion Iron. However, Essilor International SA is 3.37 times less risky than Champion Iron. It trades about 0.07 of its potential returns per unit of risk. Champion Iron Limited is currently generating about -0.01 per unit of risk. If you would invest  10,535  in Essilor International SA on October 22, 2024 and sell it today you would earn a total of  2,075  from holding Essilor International SA or generate 19.7% return on investment over 90 days.

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

Essilor International SA  vs.  Champion Iron Limited

Essilor International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Essilor International SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Essilor International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Essilor International and Champion Iron

The main advantage of trading using opposite Essilor International and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essilor International 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 Essilor International SA 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.

Check out your portfolio center.

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.