Correlation Between Charter Hall and Encounter Resources
Can any of the company-specific risk be diversified away by investing in both Charter Hall and Encounter Resources 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 Charter Hall and Encounter Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Charter Hall Retail and Encounter Resources, you can compare the effects of market volatilities on Charter Hall and Encounter Resources 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 Charter Hall with a short position of Encounter Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Hall and Encounter Resources.
Diversification Opportunities for Charter Hall and Encounter Resources
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Charter and Encounter is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Charter Hall Retail and Encounter Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encounter Resources and Charter Hall 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 Charter Hall Retail are associated (or correlated) with Encounter Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encounter Resources has no effect on the direction of Charter Hall i.e., Charter Hall and Encounter Resources go up and down completely randomly.
Pair Corralation between Charter Hall and Encounter Resources
Assuming the 90 days trading horizon Charter Hall Retail is expected to generate 0.21 times more return on investment than Encounter Resources. However, Charter Hall Retail is 4.69 times less risky than Encounter Resources. It trades about 0.12 of its potential returns per unit of risk. Encounter Resources is currently generating about -0.22 per unit of risk. If you would invest 320.00 in Charter Hall Retail on November 6, 2024 and sell it today you would earn a total of 7.00 from holding Charter Hall Retail or generate 2.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Charter Hall Retail vs. Encounter Resources
Performance |
| Timeline |
| Charter Hall Retail |
| Encounter Resources |
Charter Hall and Encounter Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charter Hall and Encounter Resources
The main advantage of trading using opposite Charter Hall and Encounter Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Hall position performs unexpectedly, Encounter Resources 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 Encounter Resources will offset losses from the drop in Encounter Resources' long position.| Charter Hall vs. Health and Plant | Charter Hall vs. Platinum Asset Management | Charter Hall vs. Iron Road | Charter Hall vs. Retail Food Group |
| Encounter Resources vs. Macquarie Bank Limited | Encounter Resources vs. Autosports Group | Encounter Resources vs. Insurance Australia Group | Encounter Resources vs. Beston Global Food |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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