Correlation Between Challenger and Inventis

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

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

Diversification Opportunities for Challenger and Inventis

-0.63

Correlation Coefficient

Challenger  Inventis

Excellent diversification

The 3 months correlation between Challenger and Inventis is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Challenger and Inventis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inventis and Challenger 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 Challenger are associated (or correlated) with Inventis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inventis has no effect on the direction of Challenger i.e., Challenger and Inventis go up and down completely randomly.

Pair Corralation between Challenger and Inventis

Assuming the 90 days trading horizon Challenger is expected to generate 0.81 times more return on investment than Inventis. However, Challenger is 1.24 times less risky than Inventis. It trades about 0.03 of its potential returns per unit of risk. Inventis is currently generating about -0.01 per unit of risk. If you would invest  591.00  in Challenger on December 29, 2024 and sell it today you would earn a total of  19.00  from holding Challenger or generate 3.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Challenger  vs.  Inventis

Challenger

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Challenger are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Challenger is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Inventis

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inventis has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Inventis 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 Challenger and Inventis

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

The idea behind Challenger and Inventis 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.