Correlation Between ChipsMedia and RPBio

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

By analyzing existing cross correlation between ChipsMedia and RPBio Inc, you can compare the effects of market volatilities on ChipsMedia and RPBio 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 RPBio. Check out your portfolio center. Please also check ongoing floating volatility patterns of ChipsMedia and RPBio.

Diversification Opportunities for ChipsMedia and RPBio

0.08

Correlation Coefficient

ChipsMedia  RPBio

Significant diversification

The 3 months correlation between ChipsMedia and RPBio is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding ChipsMedia and RPBio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RPBio Inc 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 RPBio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RPBio Inc has no effect on the direction of ChipsMedia i.e., ChipsMedia and RPBio go up and down completely randomly.

Pair Corralation between ChipsMedia and RPBio

Assuming the 90 days trading horizon ChipsMedia is expected to generate 2.02 times more return on investment than RPBio. However, ChipsMedia is 2.02 times more volatile than RPBio Inc. It trades about 0.41 of its potential returns per unit of risk. RPBio Inc is currently generating about 0.28 per unit of risk. If you would invest  1,132,000  in ChipsMedia on October 10, 2024 and sell it today you would earn a total of  481,000  from holding ChipsMedia or generate 42.49% return on investment over 90 days.

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

ChipsMedia  vs.  RPBio Inc

ChipsMedia

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ChipsMedia are ranked lower than 5 (%) 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.

RPBio Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RPBio Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ChipsMedia and RPBio

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

The idea behind ChipsMedia and RPBio Inc 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.