Correlation Between Xtract One and Champion Iron

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

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

Diversification Opportunities for Xtract One and Champion Iron

0.23

Correlation Coefficient

Xtract One  Champion Iron

Modest diversification

The 3 months correlation between Xtract and Champion is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Xtract One Technologies and Champion Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron and Xtract One 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 Xtract One Technologies 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 Xtract One i.e., Xtract One and Champion Iron go up and down completely randomly.

Pair Corralation between Xtract One and Champion Iron

Assuming the 90 days trading horizon Xtract One Technologies is expected to generate 0.9 times more return on investment than Champion Iron. However, Xtract One Technologies is 1.11 times less risky than Champion Iron. It trades about 0.08 of its potential returns per unit of risk. Champion Iron is currently generating about 0.03 per unit of risk. If you would invest  60.00  in Xtract One Technologies on September 4, 2024 and sell it today you would earn a total of  7.00  from holding Xtract One Technologies or generate 11.67% return on investment over 90 days.

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

Xtract One Technologies  vs.  Champion Iron

Xtract One Technologies

Risk-Adjusted Performance

6 of 100

Modest

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

Champion Iron

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Champion Iron are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Champion Iron is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Xtract One and Champion Iron

The main advantage of trading using opposite Xtract One and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtract One 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 Xtract One Technologies 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.