Correlation Between Collins Foods and Champion Iron

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

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

Diversification Opportunities for Collins Foods and Champion Iron

0.46

Correlation Coefficient

Collins Foods  Champion Iron

Very weak diversification

The 3 months correlation between Collins and Champion is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Collins Foods and Champion Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron and Collins Foods 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 Collins Foods 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 Collins Foods i.e., Collins Foods and Champion Iron go up and down completely randomly.

Pair Corralation between Collins Foods and Champion Iron

Assuming the 90 days trading horizon Collins Foods is expected to under-perform the Champion Iron. But the stock apears to be less risky and, when comparing its historical volatility, Collins Foods is 2.33 times less risky than Champion Iron. The stock trades about -0.05 of its potential returns per unit of risk. The Champion Iron is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  548.00  in Champion Iron on September 14, 2024 and sell it today you would earn a total of  52.00  from holding Champion Iron or generate 9.49% return on investment over 90 days.

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

Collins Foods  vs.  Champion Iron

Collins Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Collins Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Collins Foods is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Champion Iron

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Champion Iron are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Champion Iron may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Collins Foods and Champion Iron

The main advantage of trading using opposite Collins Foods and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Collins Foods 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 Collins Foods 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.