Correlation Between Scentre and Charter Hall

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

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

Diversification Opportunities for Scentre and Charter Hall

0.62

Correlation Coefficient

Scentre  Charter Hall

Poor diversification

The 3 months correlation between Scentre and Charter is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Scentre Group and Charter Hall Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Hall Long and Scentre 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 Scentre Group 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 Long has no effect on the direction of Scentre i.e., Scentre and Charter Hall go up and down completely randomly.

Pair Corralation between Scentre and Charter Hall

Assuming the 90 days trading horizon Scentre Group is expected to under-perform the Charter Hall. But the stock apears to be less risky and, when comparing its historical volatility, Scentre Group is 1.04 times less risky than Charter Hall. The stock trades about -0.08 of its potential returns per unit of risk. The Charter Hall Long is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  395.00  in Charter Hall Long on September 14, 2024 and sell it today you would lose (20.00) from holding Charter Hall Long or give up 5.06% of portfolio value over 90 days.

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

Scentre Group  vs.  Charter Hall Long

Scentre Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Charter Hall Long

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Charter Hall Long 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 Scentre and Charter Hall

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