Correlation Between CHAMPION IRON and Vale SA

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

By analyzing existing cross correlation between CHAMPION IRON and Vale SA, you can compare the effects of market volatilities on CHAMPION IRON and Vale SA 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 Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHAMPION IRON and Vale SA.

Diversification Opportunities for CHAMPION IRON and Vale SA

0.62

Correlation Coefficient

CHAMPION IRON  Vale SA

Poor diversification

The 3 months correlation between CHAMPION and Vale is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding CHAMPION IRON and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA 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 are associated (or correlated) with Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of CHAMPION IRON i.e., CHAMPION IRON and Vale SA go up and down completely randomly.

Pair Corralation between CHAMPION IRON and Vale SA

Assuming the 90 days trading horizon CHAMPION IRON is expected to generate 1.35 times more return on investment than Vale SA. However, CHAMPION IRON is 1.35 times more volatile than Vale SA. It trades about 0.0 of its potential returns per unit of risk. Vale SA is currently generating about -0.04 per unit of risk. If you would invest  438.00  in CHAMPION IRON on October 11, 2024 and sell it today you would lose (84.00) from holding CHAMPION IRON or give up 19.18% of portfolio value over 90 days.

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

CHAMPION IRON  vs.  Vale SA

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

Vale SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vale SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential 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 CHAMPION IRON and Vale SA

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

The idea behind CHAMPION IRON and Vale SA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.