Correlation Between Regal Investment and Champion Iron

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

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

Diversification Opportunities for Regal Investment and Champion Iron

-0.09

Correlation Coefficient

Regal Investment  Champion Iron

Good diversification

The 3 months correlation between Regal and Champion is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Regal Investment and Champion Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron and Regal Investment 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 Regal Investment 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 Regal Investment i.e., Regal Investment and Champion Iron go up and down completely randomly.

Pair Corralation between Regal Investment and Champion Iron

Assuming the 90 days trading horizon Regal Investment is expected to generate 2.33 times less return on investment than Champion Iron. But when comparing it to its historical volatility, Regal Investment is 2.39 times less risky than Champion Iron. It trades about 0.09 of its potential returns per unit of risk. Champion Iron is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  549.00  in Champion Iron on September 12, 2024 and sell it today you would earn a total of  82.00  from holding Champion Iron or generate 14.94% return on investment over 90 days.

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

Regal Investment  vs.  Champion Iron

Regal Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Regal Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Regal Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Champion Iron

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Champion Iron are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Champion Iron unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Regal Investment and Champion Iron

The main advantage of trading using opposite Regal Investment and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regal Investment 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 Regal Investment 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.