Correlation Between Ferrexpo PLC and Champion Iron

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

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

Diversification Opportunities for Ferrexpo PLC and Champion Iron

-0.29

Correlation Coefficient

Ferrexpo PLC  Champion Iron

Very good diversification

The 3 months correlation between Ferrexpo and Champion is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ferrexpo PLC and Champion Iron Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron Limited and Ferrexpo PLC 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 Ferrexpo PLC 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 Limited has no effect on the direction of Ferrexpo PLC i.e., Ferrexpo PLC and Champion Iron go up and down completely randomly.

Pair Corralation between Ferrexpo PLC and Champion Iron

Assuming the 90 days horizon Ferrexpo PLC is expected to generate 1.55 times more return on investment than Champion Iron. However, Ferrexpo PLC is 1.55 times more volatile than Champion Iron Limited. It trades about 0.01 of its potential returns per unit of risk. Champion Iron Limited is currently generating about 0.01 per unit of risk. If you would invest  189.00  in Ferrexpo PLC on September 14, 2024 and sell it today you would lose (47.00) from holding Ferrexpo PLC or give up 24.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Ferrexpo PLC  vs.  Champion Iron Limited

Ferrexpo PLC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ferrexpo PLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ferrexpo PLC reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Ferrexpo PLC and Champion Iron

The main advantage of trading using opposite Ferrexpo PLC and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferrexpo PLC 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 Ferrexpo PLC and Champion Iron Limited 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.