Correlation Between Challenger and Environmental
Can any of the company-specific risk be diversified away by investing in both Challenger and Environmental 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 Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Challenger and The Environmental Group, you can compare the effects of market volatilities on Challenger and Environmental 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 Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Challenger and Environmental.
Diversification Opportunities for Challenger and Environmental
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Challenger and Environmental is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Challenger and The Environmental Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Environmental 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 Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Environmental has no effect on the direction of Challenger i.e., Challenger and Environmental go up and down completely randomly.
Pair Corralation between Challenger and Environmental
Assuming the 90 days trading horizon Challenger is expected to generate 0.64 times more return on investment than Environmental. However, Challenger is 1.57 times less risky than Environmental. It trades about -0.01 of its potential returns per unit of risk. The Environmental Group is currently generating about -0.03 per unit of risk. If you would invest 644.00 in Challenger on September 2, 2024 and sell it today you would lose (22.00) from holding Challenger or give up 3.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Challenger vs. The Environmental Group
Performance |
| Timeline |
| Challenger |
| The Environmental |
Challenger and Environmental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Challenger and Environmental
The main advantage of trading using opposite Challenger and Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Challenger position performs unexpectedly, Environmental 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 Environmental will offset losses from the drop in Environmental's long position.| Challenger vs. RLF AgTech | Challenger vs. Ainsworth Game Technology | Challenger vs. Advanced Braking Technology | Challenger vs. Sandon Capital Investments |
| Environmental vs. Aneka Tambang Tbk | Environmental vs. BHP Group Limited | Environmental vs. Rio Tinto | Environmental vs. Macquarie Group Ltd |
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 Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |