Correlation Between Chroma ATE and BizLink Holding

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

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

Diversification Opportunities for Chroma ATE and BizLink Holding

0.51

Correlation Coefficient

Chroma ATE  BizLink Holding

Very weak diversification

The 3 months correlation between Chroma and BizLink is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Chroma ATE and BizLink Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BizLink Holding and Chroma ATE 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 Chroma ATE are associated (or correlated) with BizLink Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BizLink Holding has no effect on the direction of Chroma ATE i.e., Chroma ATE and BizLink Holding go up and down completely randomly.

Pair Corralation between Chroma ATE and BizLink Holding

Assuming the 90 days trading horizon Chroma ATE is expected to under-perform the BizLink Holding. But the stock apears to be less risky and, when comparing its historical volatility, Chroma ATE is 1.14 times less risky than BizLink Holding. The stock trades about -0.04 of its potential returns per unit of risk. The BizLink Holding is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  57,400  in BizLink Holding on September 15, 2024 and sell it today you would earn a total of  12,900  from holding BizLink Holding or generate 22.47% return on investment over 90 days.

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

Chroma ATE  vs.  BizLink Holding

Chroma ATE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chroma ATE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chroma ATE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BizLink Holding

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BizLink Holding are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, BizLink Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chroma ATE and BizLink Holding

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

The idea behind Chroma ATE and BizLink Holding 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.