Correlation Between Sequoia Financial and Champion Iron

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

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

Diversification Opportunities for Sequoia Financial and Champion Iron

0.74

Correlation Coefficient

Sequoia Financial  Champion Iron

Poor diversification

The 3 months correlation between Sequoia and Champion is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sequoia Financial Group and Champion Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron and Sequoia Financial 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 Sequoia Financial Group 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 Sequoia Financial i.e., Sequoia Financial and Champion Iron go up and down completely randomly.

Pair Corralation between Sequoia Financial and Champion Iron

Assuming the 90 days trading horizon Sequoia Financial Group is expected to generate 1.07 times more return on investment than Champion Iron. However, Sequoia Financial is 1.07 times more volatile than Champion Iron. It trades about -0.03 of its potential returns per unit of risk. Champion Iron is currently generating about -0.08 per unit of risk. If you would invest  41.00  in Sequoia Financial Group on September 26, 2024 and sell it today you would lose (3.00) from holding Sequoia Financial Group or give up 7.32% of portfolio value over 90 days.

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

Sequoia Financial Group  vs.  Champion Iron

Sequoia Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sequoia Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sequoia Financial 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

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Sequoia Financial and Champion Iron

The main advantage of trading using opposite Sequoia Financial and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sequoia Financial 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 Sequoia Financial Group 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.