Correlation Between Champion Iron and Labrador Iron

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

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

Diversification Opportunities for Champion Iron and Labrador Iron

-0.32

Correlation Coefficient

Champion Iron  Labrador Iron

Very good diversification

The 3 months correlation between Champion and Labrador is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron and Labrador Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Labrador Iron Ore 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 Labrador Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Labrador Iron Ore has no effect on the direction of Champion Iron i.e., Champion Iron and Labrador Iron go up and down completely randomly.

Pair Corralation between Champion Iron and Labrador Iron

Assuming the 90 days trading horizon Champion Iron is expected to generate 2.26 times more return on investment than Labrador Iron. However, Champion Iron is 2.26 times more volatile than Labrador Iron Ore. It trades about 0.35 of its potential returns per unit of risk. Labrador Iron Ore is currently generating about -0.1 per unit of risk. If you would invest  358.00  in Champion Iron on April 22, 2025 and sell it today you would earn a total of  61.00  from holding Champion Iron or generate 17.04% return on investment over 90 days.

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

Champion Iron  vs.  Labrador Iron Ore

Champion Iron

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Champion Iron are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Champion Iron displayed solid returns over the last few months and may actually be approaching a breakup point.

Labrador Iron Ore

Risk-Adjusted Performance

Very Weak

Over the last 90 days Labrador Iron Ore has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Labrador Iron is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Champion Iron and Labrador Iron

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

The idea behind Champion Iron and Labrador Iron Ore 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.