Correlation Between Challenger and Premier Investments

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

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

Diversification Opportunities for Challenger and Premier Investments

0.01

Correlation Coefficient

Challenger  Premier Investments

Significant diversification

The 3 months correlation between Challenger and Premier is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Challenger and Premier Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Investments 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 Premier Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Investments has no effect on the direction of Challenger i.e., Challenger and Premier Investments go up and down completely randomly.

Pair Corralation between Challenger and Premier Investments

Assuming the 90 days trading horizon Challenger is expected to generate 0.44 times more return on investment than Premier Investments. However, Challenger is 2.28 times less risky than Premier Investments. It trades about 0.04 of its potential returns per unit of risk. Premier Investments is currently generating about -0.06 per unit of risk. If you would invest  606.00  in Challenger on October 25, 2024 and sell it today you would earn a total of  16.00  from holding Challenger or generate 2.64% return on investment over 90 days.

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

Challenger  vs.  Premier Investments

Challenger

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Challenger are ranked lower than 3 (%) 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.

Premier Investments

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Challenger and Premier Investments

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

The idea behind Challenger and Premier Investments 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 Anywhere module to track or share privately all of your investments from the convenience of any device.