Correlation Between Waste Connections and Champion Iron

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

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

Diversification Opportunities for Waste Connections and Champion Iron

-0.56

Correlation Coefficient

Waste Connections  Champion Iron

Excellent diversification

The 3 months correlation between Waste and Champion is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Waste Connections and Champion Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron and Waste Connections 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 Waste Connections 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 Waste Connections i.e., Waste Connections and Champion Iron go up and down completely randomly.

Pair Corralation between Waste Connections and Champion Iron

Assuming the 90 days trading horizon Waste Connections is expected to generate 3.16 times less return on investment than Champion Iron. But when comparing it to its historical volatility, Waste Connections is 2.09 times less risky than Champion Iron. It trades about 0.1 of its potential returns per unit of risk. Champion Iron is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  524.00  in Champion Iron on September 12, 2024 and sell it today you would earn a total of  33.00  from holding Champion Iron or generate 6.3% return on investment over 90 days.

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

Waste Connections  vs.  Champion Iron

Waste Connections

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Connections are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Waste Connections 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

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Champion Iron are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Champion Iron may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Waste Connections and Champion Iron

The main advantage of trading using opposite Waste Connections and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Connections 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 Waste Connections 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.