Correlation Between ChipsMedia and BHI

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

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

Diversification Opportunities for ChipsMedia and BHI

0.5

Correlation Coefficient

ChipsMedia  BHI

Very weak diversification

The 3 months correlation between ChipsMedia and BHI is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding ChipsMedia and BHI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHI Co and ChipsMedia 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 ChipsMedia are associated (or correlated) with BHI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHI Co has no effect on the direction of ChipsMedia i.e., ChipsMedia and BHI go up and down completely randomly.

Pair Corralation between ChipsMedia and BHI

Assuming the 90 days trading horizon ChipsMedia is expected to generate 1.51 times less return on investment than BHI. But when comparing it to its historical volatility, ChipsMedia is 1.24 times less risky than BHI. It trades about 0.11 of its potential returns per unit of risk. BHI Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,529,000  in BHI Co on December 24, 2024 and sell it today you would earn a total of  486,000  from holding BHI Co or generate 31.79% return on investment over 90 days.

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

ChipsMedia  vs.  BHI Co

ChipsMedia

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ChipsMedia are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ChipsMedia sustained solid returns over the last few months and may actually be approaching a breakup point.

BHI Co

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BHI Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BHI sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ChipsMedia and BHI

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

The idea behind ChipsMedia and BHI Co 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.