Correlation Between Charter Hall and Errawarra Resources

Can any of the company-specific risk be diversified away by investing in both Charter Hall and Errawarra Resources 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 Errawarra Resources 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 Errawarra Resources, you can compare the effects of market volatilities on Charter Hall and Errawarra Resources 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 Errawarra Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Hall and Errawarra Resources.

Diversification Opportunities for Charter Hall and Errawarra Resources

0.64

Correlation Coefficient

Charter Hall  Errawarra Resources

Poor diversification

The 3 months correlation between Charter and Errawarra is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Charter Hall Education and Errawarra Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Errawarra Resources 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 Errawarra Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Errawarra Resources has no effect on the direction of Charter Hall i.e., Charter Hall and Errawarra Resources go up and down completely randomly.

Pair Corralation between Charter Hall and Errawarra Resources

Assuming the 90 days trading horizon Charter Hall is expected to generate 27.74 times less return on investment than Errawarra Resources. But when comparing it to its historical volatility, Charter Hall Education is 6.56 times less risky than Errawarra Resources. It trades about 0.01 of its potential returns per unit of risk. Errawarra Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6.10  in Errawarra Resources on October 22, 2024 and sell it today you would lose (2.00) from holding Errawarra Resources or give up 32.79% of portfolio value over 90 days.

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

Charter Hall Education  vs.  Errawarra Resources

Charter Hall Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Charter Hall Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Charter Hall is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Errawarra Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Errawarra Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Charter Hall and Errawarra Resources

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

The idea behind Charter Hall Education and Errawarra Resources 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.