Correlation Between Charter Hall and Sims

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

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

Diversification Opportunities for Charter Hall and Sims

-0.58

Correlation Coefficient

Charter Hall  Sims

Excellent diversification

The 3 months correlation between Charter and Sims is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Charter Hall Retail and Sims in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims and Charter Hall 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 Charter Hall Retail are associated (or correlated) with Sims. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims has no effect on the direction of Charter Hall i.e., Charter Hall and Sims go up and down completely randomly.

Pair Corralation between Charter Hall and Sims

Assuming the 90 days trading horizon Charter Hall Retail is expected to under-perform the Sims. But the stock apears to be less risky and, when comparing its historical volatility, Charter Hall Retail is 2.14 times less risky than Sims. The stock trades about -0.18 of its potential returns per unit of risk. The Sims is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,099  in Sims on September 13, 2024 and sell it today you would earn a total of  191.00  from holding Sims or generate 17.38% return on investment over 90 days.

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

Charter Hall Retail  vs.  Sims

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

Sims

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sims are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Sims unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charter Hall and Sims

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

The idea behind Charter Hall Retail and Sims 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.