Correlation Between Challenger and Green Technology
Can any of the company-specific risk be diversified away by investing in both Challenger and Green Technology 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 Green Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Challenger and Green Technology Metals, you can compare the effects of market volatilities on Challenger and Green Technology 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 Green Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Challenger and Green Technology.
Diversification Opportunities for Challenger and Green Technology
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Challenger and Green is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Challenger and Green Technology Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Technology Metals 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 Green Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Technology Metals has no effect on the direction of Challenger i.e., Challenger and Green Technology go up and down completely randomly.
Pair Corralation between Challenger and Green Technology
Assuming the 90 days trading horizon Challenger is expected to generate 0.3 times more return on investment than Green Technology. However, Challenger is 3.3 times less risky than Green Technology. It trades about 0.06 of its potential returns per unit of risk. Green Technology Metals is currently generating about -0.24 per unit of risk. If you would invest 600.00 in Challenger on August 25, 2024 and sell it today you would earn a total of 9.00 from holding Challenger or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Challenger vs. Green Technology Metals
Performance |
| Timeline |
| Challenger |
| Green Technology Metals |
Challenger and Green Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Challenger and Green Technology
The main advantage of trading using opposite Challenger and Green Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Challenger position performs unexpectedly, Green Technology 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 Green Technology will offset losses from the drop in Green Technology's long position.| Challenger vs. Green Technology Metals | Challenger vs. Health and Plant | Challenger vs. Fisher Paykel Healthcare | Challenger vs. Ras Technology Holdings |
| Green Technology vs. Clime Investment Management | Green Technology vs. G8 Education | Green Technology vs. Mach7 Technologies | Green Technology vs. Janison Education 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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