Correlation Between Charter Hall and Metals X

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

Diversification Opportunities for Charter Hall and Metals X

0.32

Correlation Coefficient

Charter Hall  Metals X

Weak diversification

The 3 months correlation between Charter and Metals is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Charter Hall Retail and Metals X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals X 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 Metals X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals X has no effect on the direction of Charter Hall i.e., Charter Hall and Metals X go up and down completely randomly.

Pair Corralation between Charter Hall and Metals X

Assuming the 90 days trading horizon Charter Hall Retail is expected to under-perform the Metals X. But the stock apears to be less risky and, when comparing its historical volatility, Charter Hall Retail is 2.86 times less risky than Metals X. The stock trades about -0.1 of its potential returns per unit of risk. The Metals X is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  45.00  in Metals X on October 10, 2024 and sell it today you would lose (3.00) from holding Metals X or give up 6.67% of portfolio value over 90 days.

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

Charter Hall Retail  vs.  Metals X

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.

Metals X

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Charter Hall and Metals X

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

The idea behind Charter Hall Retail and Metals X 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.