Correlation Between Super Retail and Challenger

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

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

Diversification Opportunities for Super Retail and Challenger

0.8

Correlation Coefficient

Super Retail  Challenger

Very poor diversification

The 3 months correlation between Super and Challenger is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Super Retail Group and Challenger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Challenger and Super Retail 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 Super Retail 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 Super Retail i.e., Super Retail and Challenger go up and down completely randomly.

Pair Corralation between Super Retail and Challenger

Assuming the 90 days trading horizon Super Retail Group is expected to under-perform the Challenger. In addition to that, Super Retail is 1.18 times more volatile than Challenger. It trades about -0.15 of its total potential returns per unit of risk. Challenger is currently generating about -0.1 per unit of volatility. If you would invest  670.00  in Challenger on October 8, 2024 and sell it today you would lose (61.00) from holding Challenger or give up 9.1% of portfolio value over 90 days.

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

Super Retail Group  vs.  Challenger

Super Retail Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Super Retail 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 essential indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Challenger

Risk-Adjusted Performance

0 of 100

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 latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Super Retail and Challenger

The main advantage of trading using opposite Super Retail and Challenger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Super Retail 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 Super Retail 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.