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 Retail, 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

0.22

Correlation Coefficient

Australian Unity  Charter Hall

Modest diversification

The 3 months correlation between Australian and Charter is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Australian Unity Office and Charter Hall Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Hall Retail 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 Retail 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 Office is expected to generate 0.49 times more return on investment than Charter Hall. However, Australian Unity Office is 2.02 times less risky than Charter Hall. It trades about 0.15 of its potential returns per unit of risk. Charter Hall Retail is currently generating about 0.04 per unit of risk. If you would invest  105.00  in Australian Unity Office on November 28, 2024 and sell it today you would earn a total of  5.00  from holding Australian Unity Office or generate 4.76% return on investment over 90 days.

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

Australian Unity Office  vs.  Charter Hall Retail

Australian Unity Office

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Unity Office are ranked lower than 11 (%) 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 Retail

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Hall Retail are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic 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 Retail 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.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.