Correlation Between Premier Investments and Challenger

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

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

Diversification Opportunities for Premier Investments and Challenger

-0.25

Correlation Coefficient

Premier Investments  Challenger

Very good diversification

The 3 months correlation between Premier and Challenger is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Premier Investments and Challenger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Challenger and Premier Investments 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 Premier Investments 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 Premier Investments i.e., Premier Investments and Challenger go up and down completely randomly.

Pair Corralation between Premier Investments and Challenger

Assuming the 90 days trading horizon Premier Investments is expected to generate 1.43 times more return on investment than Challenger. However, Premier Investments is 1.43 times more volatile than Challenger. It trades about 0.01 of its potential returns per unit of risk. Challenger is currently generating about 0.01 per unit of risk. If you would invest  3,504  in Premier Investments on September 5, 2024 and sell it today you would earn a total of  2.00  from holding Premier Investments or generate 0.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Premier Investments  vs.  Challenger

Premier Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premier Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Premier Investments is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the 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 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 Premier Investments and Challenger

The main advantage of trading using opposite Premier Investments and Challenger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier Investments 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 Premier Investments 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.