Correlation Between Charter Hall and Collins Foods

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

By analyzing existing cross correlation between Charter Hall Retail and Collins Foods, you can compare the effects of market volatilities on Charter Hall and Collins Foods 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 Collins Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Hall and Collins Foods.

Diversification Opportunities for Charter Hall and Collins Foods

-0.36

Correlation Coefficient

Charter Hall  Collins Foods

Very good diversification

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

Pair Corralation between Charter Hall and Collins Foods

Assuming the 90 days trading horizon Charter Hall Retail is expected to under-perform the Collins Foods. But the stock apears to be less risky and, when comparing its historical volatility, Charter Hall Retail is 1.14 times less risky than Collins Foods. The stock trades about -0.07 of its potential returns per unit of risk. The Collins Foods is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  772.00  in Collins Foods on September 2, 2024 and sell it today you would earn a total of  87.00  from holding Collins Foods or generate 11.27% return on investment over 90 days.

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

Charter Hall Retail  vs.  Collins Foods

Charter Hall Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Charter Hall Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic 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.

Collins Foods

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Collins Foods are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Collins Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Charter Hall and Collins Foods

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

The idea behind Charter Hall Retail and Collins Foods 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.