Correlation Between Champion Iron and Stelco Holdings

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

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

Diversification Opportunities for Champion Iron and Stelco Holdings

-0.03

Correlation Coefficient

Champion Iron  Stelco Holdings

Good diversification

The 3 months correlation between Champion and Stelco is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron Limited and Stelco Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stelco Holdings 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 Limited are associated (or correlated) with Stelco Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stelco Holdings has no effect on the direction of Champion Iron i.e., Champion Iron and Stelco Holdings go up and down completely randomly.

Pair Corralation between Champion Iron and Stelco Holdings

Assuming the 90 days horizon Champion Iron Limited is expected to generate 6.76 times more return on investment than Stelco Holdings. However, Champion Iron is 6.76 times more volatile than Stelco Holdings. It trades about 0.07 of its potential returns per unit of risk. Stelco Holdings is currently generating about 0.14 per unit of risk. If you would invest  344.00  in Champion Iron Limited on September 15, 2024 and sell it today you would earn a total of  51.00  from holding Champion Iron Limited or generate 14.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.81%
Values	Daily Returns

Champion Iron Limited  vs.  Stelco Holdings

Champion Iron Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Champion Iron Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Champion Iron reported solid returns over the last few months and may actually be approaching a breakup point.

Stelco Holdings

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Stelco Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Stelco Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Champion Iron and Stelco Holdings

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

The idea behind Champion Iron Limited and Stelco Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..