Correlation Between Challenger and G8 Education
Can any of the company-specific risk be diversified away by investing in both Challenger and G8 Education 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 G8 Education into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Challenger and G8 Education, you can compare the effects of market volatilities on Challenger and G8 Education 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 G8 Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Challenger and G8 Education.
Diversification Opportunities for Challenger and G8 Education
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Challenger and GEM is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Challenger and G8 Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G8 Education 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 G8 Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G8 Education has no effect on the direction of Challenger i.e., Challenger and G8 Education go up and down completely randomly.
Pair Corralation between Challenger and G8 Education
Assuming the 90 days trading horizon Challenger is expected to under-perform the G8 Education. But the stock apears to be less risky and, when comparing its historical volatility, Challenger is 1.1 times less risky than G8 Education. The stock trades about -0.01 of its potential returns per unit of risk. The G8 Education is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 108.00 in G8 Education on September 3, 2024 and sell it today you would earn a total of 28.00 from holding G8 Education or generate 25.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Challenger vs. G8 Education
Performance |
| Timeline |
| Challenger |
| G8 Education |
Challenger and G8 Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Challenger and G8 Education
The main advantage of trading using opposite Challenger and G8 Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Challenger position performs unexpectedly, G8 Education 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 G8 Education will offset losses from the drop in G8 Education's long position.| Challenger vs. Fisher Paykel Healthcare | Challenger vs. Aurelia Metals | Challenger vs. Apiam Animal Health | Challenger vs. DY6 Metals |
| G8 Education vs. Westpac Banking | G8 Education vs. Champion Iron | G8 Education vs. iShares Global Healthcare | G8 Education vs. Peel Mining |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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