Correlation Between CHIE and CHII

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

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

Diversification Opportunities for CHIE and CHII

0.93

Correlation Coefficient

CHIE  CHII

Almost no diversification

The 3 months correlation between CHIE and CHII is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding CHIE and CHII in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHII 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 CHII. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHII has no effect on the direction of CHIE i.e., CHIE and CHII go up and down completely randomly.

Pair Corralation between CHIE and CHII

If you would invest  1,224  in CHII on September 5, 2024 and sell it today you would earn a total of  0.00  from holding CHII or generate 0.0% return on investment over 90 days.

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

CHIE  vs.  CHII

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.

CHII

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHII has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, CHII 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 CHII

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

The idea behind CHIE and CHII 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.