Correlation Between Challenger and Academies Australasia
Can any of the company-specific risk be diversified away by investing in both Challenger and Academies Australasia 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 Challenger and Academies Australasia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Challenger and Academies Australasia Group, you can compare the effects of market volatilities on Challenger and Academies Australasia 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 Challenger with a short position of Academies Australasia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Challenger and Academies Australasia.
Diversification Opportunities for Challenger and Academies Australasia
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Challenger and Academies is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Challenger and Academies Australasia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Academies Australasia and Challenger 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 Challenger are associated (or correlated) with Academies Australasia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Academies Australasia has no effect on the direction of Challenger i.e., Challenger and Academies Australasia go up and down completely randomly.
Pair Corralation between Challenger and Academies Australasia
Assuming the 90 days trading horizon Challenger is expected to generate 0.37 times more return on investment than Academies Australasia. However, Challenger is 2.7 times less risky than Academies Australasia. It trades about -0.01 of its potential returns per unit of risk. Academies Australasia Group is currently generating about -0.02 per unit of risk. If you would invest 714.00 in Challenger on September 3, 2024 and sell it today you would lose (92.00) from holding Challenger or give up 12.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Challenger vs. Academies Australasia Group
Performance |
| Timeline |
| Challenger |
| Academies Australasia |
Challenger and Academies Australasia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Challenger and Academies Australasia
The main advantage of trading using opposite Challenger and Academies Australasia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Challenger position performs unexpectedly, Academies Australasia 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 Academies Australasia will offset losses from the drop in Academies Australasia's long position.| Challenger vs. Fisher Paykel Healthcare | Challenger vs. Aurelia Metals | Challenger vs. Apiam Animal Health | Challenger vs. DY6 Metals |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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