Correlation Between Challenger and Future Generation
Can any of the company-specific risk be diversified away by investing in both Challenger and Future Generation 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 Future Generation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Challenger and Future Generation Australia, you can compare the effects of market volatilities on Challenger and Future Generation 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 Future Generation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Challenger and Future Generation.
Diversification Opportunities for Challenger and Future Generation
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Challenger and Future is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Challenger and Future Generation Australia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Generation 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 Future Generation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Generation has no effect on the direction of Challenger i.e., Challenger and Future Generation go up and down completely randomly.
Pair Corralation between Challenger and Future Generation
Assuming the 90 days trading horizon Challenger is expected to generate 2.06 times less return on investment than Future Generation. In addition to that, Challenger is 1.6 times more volatile than Future Generation Australia. It trades about 0.02 of its total potential returns per unit of risk. Future Generation Australia is currently generating about 0.07 per unit of volatility. If you would invest 100.00 in Future Generation Australia on September 1, 2024 and sell it today you would earn a total of 29.00 from holding Future Generation Australia or generate 29.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Challenger vs. Future Generation Australia
Performance |
| Timeline |
| Challenger |
| Future Generation |
Challenger and Future Generation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Challenger and Future Generation
The main advantage of trading using opposite Challenger and Future Generation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Challenger position performs unexpectedly, Future Generation 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 Future Generation will offset losses from the drop in Future Generation's long position.| Challenger vs. Group 6 Metals | Challenger vs. Land Homes Group | Challenger vs. Sandon Capital Investments | Challenger vs. Clime Investment Management |
| Future Generation vs. Credit Clear | Future Generation vs. RLF AgTech | Future Generation vs. Commonwealth Bank of | Future Generation vs. EP Financial Group |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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