Correlation Between CHIE and CHIH

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

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

Diversification Opportunities for CHIE and CHIH

0.77

Correlation Coefficient

CHIE  CHIH

Poor diversification

The 3 months correlation between CHIE and CHIH is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding CHIE and CHIH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHIH and CHIE 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 CHIE are associated (or correlated) with CHIH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHIH has no effect on the direction of CHIE i.e., CHIE and CHIH go up and down completely randomly.

Pair Corralation between CHIE and CHIH

If you would invest  1,460  in CHIH on September 21, 2024 and sell it today you would earn a total of  0.00  from holding CHIH or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	50.0%
Values	Daily Returns

CHIE  vs.  CHIH

CHIE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHIE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, CHIE is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

CHIH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHIH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, CHIH is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with CHIE and CHIH

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

The idea behind CHIE and CHIH 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.