Correlation Between Challenger and Queste Communications

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

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

Diversification Opportunities for Challenger and Queste Communications

0.36

Correlation Coefficient

Challenger  Queste Communications

Weak diversification

The 3 months correlation between Challenger and Queste is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Challenger and Queste Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Queste Communications 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 Queste Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Queste Communications has no effect on the direction of Challenger i.e., Challenger and Queste Communications go up and down completely randomly.

Pair Corralation between Challenger and Queste Communications

Assuming the 90 days trading horizon Challenger is expected to generate 0.77 times more return on investment than Queste Communications. However, Challenger is 1.3 times less risky than Queste Communications. It trades about -0.02 of its potential returns per unit of risk. Queste Communications is currently generating about -0.22 per unit of risk. If you would invest  608.00  in Challenger on September 24, 2024 and sell it today you would lose (5.00) from holding Challenger or give up 0.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Challenger  vs.  Queste Communications

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 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.

Queste Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Queste Communications 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.

Pair Trading with Challenger and Queste Communications

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

The idea behind Challenger and Queste Communications 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.