Correlation Between Charter Hall and Energy Resources
Can any of the company-specific risk be diversified away by investing in both Charter Hall and Energy 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 Energy 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 Energy Resources, you can compare the effects of market volatilities on Charter Hall and Energy 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 Energy Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Hall and Energy Resources.
Diversification Opportunities for Charter Hall and Energy Resources
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Charter and Energy is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Charter Hall Retail and Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy 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 Energy Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Resources has no effect on the direction of Charter Hall i.e., Charter Hall and Energy Resources go up and down completely randomly.
Pair Corralation between Charter Hall and Energy Resources
Assuming the 90 days trading horizon Charter Hall is expected to generate 15.0 times less return on investment than Energy Resources. But when comparing it to its historical volatility, Charter Hall Retail is 9.75 times less risky than Energy Resources. It trades about 0.01 of its potential returns per unit of risk. Energy Resources is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 5.39 in Energy Resources on August 31, 2024 and sell it today you would lose (5.09) from holding Energy Resources or give up 94.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Charter Hall Retail vs. Energy Resources
Performance |
| Timeline |
| Charter Hall Retail |
| Energy Resources |
Charter Hall and Energy Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charter Hall and Energy Resources
The main advantage of trading using opposite Charter Hall and Energy Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Hall position performs unexpectedly, Energy 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 Energy Resources will offset losses from the drop in Energy Resources' long position.| Charter Hall vs. Dexus Convenience Retail | Charter Hall vs. Super Retail Group | Charter Hall vs. Firetail Resources | Charter Hall vs. Future Generation Global |
| Energy Resources vs. AiMedia Technologies | Energy Resources vs. Infomedia | Energy Resources vs. Argo Investments | Energy Resources vs. Collins Foods |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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