Correlation Between RBC Discount and Champion Iron

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

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

Diversification Opportunities for RBC Discount and Champion Iron

-0.68

Correlation Coefficient

RBC Discount  Champion Iron

Excellent diversification

The 3 months correlation between RBC and Champion is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding RBC Discount Bond and Champion Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron and RBC Discount 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 RBC Discount Bond 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 RBC Discount i.e., RBC Discount and Champion Iron go up and down completely randomly.

Pair Corralation between RBC Discount and Champion Iron

Assuming the 90 days trading horizon RBC Discount Bond is expected to generate 0.13 times more return on investment than Champion Iron. However, RBC Discount Bond is 7.43 times less risky than Champion Iron. It trades about 0.12 of its potential returns per unit of risk. Champion Iron is currently generating about -0.02 per unit of risk. If you would invest  1,979  in RBC Discount Bond on October 5, 2024 and sell it today you would earn a total of  210.00  from holding RBC Discount Bond or generate 10.61% return on investment over 90 days.

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

RBC Discount Bond  vs.  Champion Iron

RBC Discount Bond

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Discount Bond are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, RBC Discount is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the 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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with RBC Discount and Champion Iron

The main advantage of trading using opposite RBC Discount and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Discount 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 RBC Discount Bond 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.