Correlation Between Metals X and Charter Hall

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

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

Diversification Opportunities for Metals X and Charter Hall

0.84

Correlation Coefficient

Metals X  Charter Hall

Very poor diversification

The 3 months correlation between Metals and Charter is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Metals X and Charter Hall Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Hall Retail and Metals X 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 Metals X are associated (or correlated) with Charter Hall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Hall Retail has no effect on the direction of Metals X i.e., Metals X and Charter Hall go up and down completely randomly.

Pair Corralation between Metals X and Charter Hall

Assuming the 90 days trading horizon Metals X is expected to generate 4.09 times more return on investment than Charter Hall. However, Metals X is 4.09 times more volatile than Charter Hall Retail. It trades about 0.26 of its potential returns per unit of risk. Charter Hall Retail is currently generating about 0.17 per unit of risk. If you would invest  40.00  in Metals X on December 21, 2024 and sell it today you would earn a total of  32.00  from holding Metals X or generate 80.0% return on investment over 90 days.

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

Metals X  vs.  Charter Hall Retail

Metals X

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Metals X are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Metals X unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 13 (%) 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.

Pair Trading with Metals X and Charter Hall

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

The idea behind Metals X and Charter Hall Retail 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.