Correlation Between Charter Hall and Metro Mining

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

Diversification Opportunities for Charter Hall and Metro Mining

-0.69

Correlation Coefficient

Charter Hall  Metro Mining

Excellent diversification

The 3 months correlation between Charter and Metro is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Charter Hall Education and Metro Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Mining 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 Metro Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Mining has no effect on the direction of Charter Hall i.e., Charter Hall and Metro Mining go up and down completely randomly.

Pair Corralation between Charter Hall and Metro Mining

Assuming the 90 days trading horizon Charter Hall Education is expected to under-perform the Metro Mining. But the stock apears to be less risky and, when comparing its historical volatility, Charter Hall Education is 2.9 times less risky than Metro Mining. The stock trades about -0.09 of its potential returns per unit of risk. The Metro Mining is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4.30  in Metro Mining on September 28, 2024 and sell it today you would earn a total of  1.20  from holding Metro Mining or generate 27.91% return on investment over 90 days.

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

Charter Hall Education  vs.  Metro Mining

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.

Metro Mining

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Mining are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Metro Mining unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charter Hall and Metro Mining

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

The idea behind Charter Hall Education and Metro Mining 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.