Correlation Between G8 Education and Challenger
Can any of the company-specific risk be diversified away by investing in both G8 Education and Challenger 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 G8 Education and Challenger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between G8 Education and Challenger, you can compare the effects of market volatilities on G8 Education and Challenger 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 G8 Education with a short position of Challenger. Check out your portfolio center. Please also check ongoing floating volatility patterns of G8 Education and Challenger.
Diversification Opportunities for G8 Education and Challenger
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between GEM and Challenger is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding G8 Education and Challenger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Challenger and G8 Education 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 G8 Education are associated (or correlated) with Challenger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Challenger has no effect on the direction of G8 Education i.e., G8 Education and Challenger go up and down completely randomly.
Pair Corralation between G8 Education and Challenger
Assuming the 90 days trading horizon G8 Education is expected to generate 1.1 times more return on investment than Challenger. However, G8 Education is 1.1 times more volatile than Challenger. It trades about 0.02 of its potential returns per unit of risk. Challenger is currently generating about -0.01 per unit of risk. If you would invest 115.00 in G8 Education on October 13, 2024 and sell it today you would earn a total of 12.00 from holding G8 Education or generate 10.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
G8 Education vs. Challenger
Performance |
| Timeline |
| G8 Education |
| Challenger |
G8 Education and Challenger Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with G8 Education and Challenger
The main advantage of trading using opposite G8 Education and Challenger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G8 Education position performs unexpectedly, Challenger 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 Challenger will offset losses from the drop in Challenger's long position.| G8 Education vs. WiseTech Global Limited | G8 Education vs. Ambertech | G8 Education vs. Carnegie Clean Energy | G8 Education vs. Neurotech International |
| Challenger vs. Carawine Resources Limited | Challenger vs. Kneomedia | Challenger vs. Dexus Convenience Retail | Challenger vs. G8 Education |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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