Correlation Between Champion Iron and Medical Facilities

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

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

Diversification Opportunities for Champion Iron and Medical Facilities

-0.74

Correlation Coefficient

Champion Iron  Medical Facilities

Pay attention - limited upside

The 3 months correlation between Champion and Medical is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and Medical Facilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Facilities 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 Medical Facilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Facilities has no effect on the direction of Champion Iron i.e., Champion Iron and Medical Facilities go up and down completely randomly.

Pair Corralation between Champion Iron and Medical Facilities

Assuming the 90 days trading horizon Champion Iron is expected to under-perform the Medical Facilities. In addition to that, Champion Iron is 1.74 times more volatile than Medical Facilities. It trades about -0.01 of its total potential returns per unit of risk. Medical Facilities is currently generating about 0.13 per unit of volatility. If you would invest  1,245  in Medical Facilities on September 23, 2024 and sell it today you would earn a total of  317.00  from holding Medical Facilities or generate 25.46% return on investment over 90 days.

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

Champion Iron  vs.  Medical Facilities

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 very healthy basic indicators, Champion Iron is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Medical Facilities

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Facilities are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Medical Facilities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Champion Iron and Medical Facilities

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

The idea behind Champion Iron and Medical Facilities 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.