Correlation Between Charter Hall and CSL

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

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

Diversification Opportunities for Charter Hall and CSL

-0.75

Correlation Coefficient

Charter Hall  CSL

Pay attention - limited upside

The 3 months correlation between Charter and CSL is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Charter Hall Education and CSL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL and Charter Hall 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 Charter Hall Education are associated (or correlated) with CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL has no effect on the direction of Charter Hall i.e., Charter Hall and CSL go up and down completely randomly.

Pair Corralation between Charter Hall and CSL

Assuming the 90 days trading horizon Charter Hall Education is expected to generate 1.48 times more return on investment than CSL. However, Charter Hall is 1.48 times more volatile than CSL. It trades about 0.07 of its potential returns per unit of risk. CSL is currently generating about -0.12 per unit of risk. If you would invest  266.00  in Charter Hall Education on December 26, 2024 and sell it today you would earn a total of  17.00  from holding Charter Hall Education or generate 6.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Charter Hall Education  vs.  CSL

Charter Hall Education

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Hall Education are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Charter Hall may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CSL

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential 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 Charter Hall and CSL

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

The idea behind Charter Hall Education and CSL 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.