Correlation Between Technology One and Charter Hall

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

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

Diversification Opportunities for Technology One and Charter Hall

-0.72

Correlation Coefficient

Technology One  Charter Hall

Pay attention - limited upside

The 3 months correlation between Technology and Charter is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Technology One 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 Technology One 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 Technology One 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 Technology One i.e., Technology One and Charter Hall go up and down completely randomly.

Pair Corralation between Technology One and Charter Hall

Assuming the 90 days trading horizon Technology One is expected to generate 1.97 times more return on investment than Charter Hall. However, Technology One is 1.97 times more volatile than Charter Hall Retail. It trades about 0.28 of its potential returns per unit of risk. Charter Hall Retail is currently generating about -0.05 per unit of risk. If you would invest  2,448  in Technology One on October 6, 2024 and sell it today you would earn a total of  618.00  from holding Technology One or generate 25.25% return on investment over 90 days.

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

Technology One  vs.  Charter Hall Retail

Technology One

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Technology One are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Technology One unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Technology One and Charter Hall

The main advantage of trading using opposite Technology One and Charter Hall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology One 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 Technology One 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.