Correlation Between Challenger and GQG Partners

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

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

Diversification Opportunities for Challenger and GQG Partners

0.42

Correlation Coefficient

Challenger  GQG Partners

Very weak diversification

The 3 months correlation between Challenger and GQG is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Challenger and GQG Partners DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GQG Partners DRC and Challenger 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 Challenger are associated (or correlated) with GQG Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GQG Partners DRC has no effect on the direction of Challenger i.e., Challenger and GQG Partners go up and down completely randomly.

Pair Corralation between Challenger and GQG Partners

Assuming the 90 days trading horizon Challenger is expected to generate 0.38 times more return on investment than GQG Partners. However, Challenger is 2.62 times less risky than GQG Partners. It trades about -0.1 of its potential returns per unit of risk. GQG Partners DRC is currently generating about -0.11 per unit of risk. If you would invest  662.00  in Challenger on September 26, 2024 and sell it today you would lose (61.00) from holding Challenger or give up 9.21% of portfolio value over 90 days.

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

Challenger  vs.  GQG Partners DRC

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.

GQG Partners DRC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GQG Partners DRC 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Challenger and GQG Partners

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

The idea behind Challenger and GQG Partners DRC 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.