Correlation Between Challenger and Microequities Asset

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

By analyzing existing cross correlation between Challenger and Microequities Asset Management, you can compare the effects of market volatilities on Challenger and Microequities Asset 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 Microequities Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Challenger and Microequities Asset.

Diversification Opportunities for Challenger and Microequities Asset

0.49

Correlation Coefficient

Challenger  Microequities Asset

Very weak diversification

The 3 months correlation between Challenger and Microequities is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Challenger and Microequities Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microequities Asset 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 Microequities Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microequities Asset has no effect on the direction of Challenger i.e., Challenger and Microequities Asset go up and down completely randomly.

Pair Corralation between Challenger and Microequities Asset

Assuming the 90 days trading horizon Challenger is expected to under-perform the Microequities Asset. But the stock apears to be less risky and, when comparing its historical volatility, Challenger is 1.36 times less risky than Microequities Asset. The stock trades about 0.0 of its potential returns per unit of risk. The Microequities Asset Management is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  52.00  in Microequities Asset Management on September 25, 2024 and sell it today you would earn a total of  0.00  from holding Microequities Asset Management or generate 0.0% return on investment over 90 days.

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

Challenger  vs.  Microequities Asset Management

Challenger

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Challenger has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Microequities Asset

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microequities Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Microequities Asset 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 Microequities Asset

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

The idea behind Challenger and Microequities Asset Management 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.