Correlation Between Green Technology and Challenger
Can any of the company-specific risk be diversified away by investing in both Green Technology 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 Green Technology and Challenger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Green Technology Metals and Challenger, you can compare the effects of market volatilities on Green Technology 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 Green Technology with a short position of Challenger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Green Technology and Challenger.
Diversification Opportunities for Green Technology and Challenger
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Green and Challenger is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Green Technology Metals and Challenger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Challenger and Green Technology 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 Green Technology Metals 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 Green Technology i.e., Green Technology and Challenger go up and down completely randomly.
Pair Corralation between Green Technology and Challenger
Assuming the 90 days trading horizon Green Technology Metals is expected to under-perform the Challenger. In addition to that, Green Technology is 3.69 times more volatile than Challenger. It trades about -0.37 of its total potential returns per unit of risk. Challenger is currently generating about -0.01 per unit of volatility. If you would invest 611.00 in Challenger on August 28, 2024 and sell it today you would lose (3.00) from holding Challenger or give up 0.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Green Technology Metals vs. Challenger
Performance |
| Timeline |
| Green Technology Metals |
| Challenger |
Green Technology and Challenger Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Green Technology and Challenger
The main advantage of trading using opposite Green Technology and Challenger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Green Technology 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.| Green Technology vs. Northern Star Resources | Green Technology vs. Evolution Mining | Green Technology vs. Bluescope Steel | Green Technology vs. Sandfire Resources NL |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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