Correlation Between Charter Hall and Sims

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

Diversification Opportunities for Charter Hall and Sims

0.67

Correlation Coefficient

Charter Hall  Sims

Poor diversification

The 3 months correlation between Charter and Sims is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Charter Hall Retail and Sims in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims 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 Sims. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims has no effect on the direction of Charter Hall i.e., Charter Hall and Sims go up and down completely randomly.

Pair Corralation between Charter Hall and Sims

Assuming the 90 days trading horizon Charter Hall is expected to generate 2.22 times less return on investment than Sims. But when comparing it to its historical volatility, Charter Hall Retail is 1.69 times less risky than Sims. It trades about 0.18 of its potential returns per unit of risk. Sims is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,187  in Sims on December 29, 2024 and sell it today you would earn a total of  335.00  from holding Sims or generate 28.22% return on investment over 90 days.

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

Charter Hall Retail  vs.  Sims

Charter Hall Retail

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Hall Retail are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Charter Hall may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sims

Risk-Adjusted Performance

Solid

Over the last 90 days Sims has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak primary indicators, Sims unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charter Hall and Sims

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

The idea behind Charter Hall Retail and Sims 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.