Correlation Between Retail Food and Challenger

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

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

Diversification Opportunities for Retail Food and Challenger

0.11

Correlation Coefficient

Retail Food  Challenger

Average diversification

The 3 months correlation between Retail and Challenger is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Retail Food Group and Challenger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Challenger and Retail Food 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 Retail Food Group are associated (or correlated) with Challenger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Challenger has no effect on the direction of Retail Food i.e., Retail Food and Challenger go up and down completely randomly.

Pair Corralation between Retail Food and Challenger

Assuming the 90 days trading horizon Retail Food Group is expected to under-perform the Challenger. In addition to that, Retail Food is 1.6 times more volatile than Challenger. It trades about -0.16 of its total potential returns per unit of risk. Challenger is currently generating about -0.03 per unit of volatility. If you would invest  610.00  in Challenger on December 3, 2024 and sell it today you would lose (28.00) from holding Challenger or give up 4.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Retail Food Group  vs.  Challenger

Retail Food Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Retail Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Challenger

Risk-Adjusted Performance

Very Weak

Over the last 90 days Challenger has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Challenger 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 Retail Food and Challenger

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

The idea behind Retail Food Group and Challenger 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.