Correlation Between Australian Unity and Charter Hall

Can any of the company-specific risk be diversified away by investing in both Australian Unity and Charter Hall 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 Australian Unity and Charter Hall into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Australian Unity Office and Charter Hall Education, you can compare the effects of market volatilities on Australian Unity and Charter Hall 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 Australian Unity with a short position of Charter Hall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Unity and Charter Hall.

Diversification Opportunities for Australian Unity and Charter Hall

0.42

Correlation Coefficient

Australian Unity  Charter Hall

Very weak diversification

The 3 months correlation between Australian and Charter is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Australian Unity Office and Charter Hall Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Hall Education and Australian Unity 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 Australian Unity Office are associated (or correlated) with Charter Hall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Hall Education has no effect on the direction of Australian Unity i.e., Australian Unity and Charter Hall go up and down completely randomly.

Pair Corralation between Australian Unity and Charter Hall

Assuming the 90 days trading horizon Australian Unity is expected to generate 1.57 times less return on investment than Charter Hall. But when comparing it to its historical volatility, Australian Unity Office is 3.12 times less risky than Charter Hall. It trades about 0.11 of its potential returns per unit of risk. Charter Hall Education is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  266.00  in Charter Hall Education on December 25, 2024 and sell it today you would earn a total of  13.00  from holding Charter Hall Education or generate 4.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Australian Unity Office  vs.  Charter Hall Education

Australian Unity Office

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Unity Office are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Australian Unity is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Charter Hall Education

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Hall Education are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Charter Hall is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Australian Unity and Charter Hall

The main advantage of trading using opposite Australian Unity and Charter Hall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Unity position performs unexpectedly, Charter Hall 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 Charter Hall will offset losses from the drop in Charter Hall's long position.

The idea behind Australian Unity Office and Charter Hall Education pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.