Correlation Between Iron Road and Champion Iron

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

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

Diversification Opportunities for Iron Road and Champion Iron

0.63

Correlation Coefficient

Iron Road  Champion Iron

Poor diversification

The 3 months correlation between Iron and Champion is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road and Champion Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron and Iron Road 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 Iron Road 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 has no effect on the direction of Iron Road i.e., Iron Road and Champion Iron go up and down completely randomly.

Pair Corralation between Iron Road and Champion Iron

Assuming the 90 days trading horizon Iron Road is expected to under-perform the Champion Iron. In addition to that, Iron Road is 1.54 times more volatile than Champion Iron. It trades about -0.02 of its total potential returns per unit of risk. Champion Iron is currently generating about -0.01 per unit of volatility. If you would invest  718.00  in Champion Iron on October 4, 2024 and sell it today you would lose (143.00) from holding Champion Iron or give up 19.92% of portfolio value over 90 days.

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

Iron Road  vs.  Champion Iron

Iron Road

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron Road 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 fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Champion Iron

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Iron Road and Champion Iron

The main advantage of trading using opposite Iron Road and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Road 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 Iron Road and Champion Iron 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.