Correlation Between CHIM and Pacer Financial

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

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

Diversification Opportunities for CHIM and Pacer Financial

-0.07

Correlation Coefficient

CHIM  Pacer Financial

Good diversification

The 3 months correlation between CHIM and Pacer is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding CHIM and Pacer Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Financial and CHIM 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 CHIM are associated (or correlated) with Pacer Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Financial has no effect on the direction of CHIM i.e., CHIM and Pacer Financial go up and down completely randomly.

Pair Corralation between CHIM and Pacer Financial

Given the investment horizon of 90 days CHIM is expected to generate 1.09 times more return on investment than Pacer Financial. However, CHIM is 1.09 times more volatile than Pacer Financial. It trades about 0.11 of its potential returns per unit of risk. Pacer Financial is currently generating about 0.03 per unit of risk. If you would invest  1,558  in CHIM on September 19, 2024 and sell it today you would earn a total of  86.00  from holding CHIM or generate 5.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	11.4%
Values	Daily Returns

CHIM  vs.  Pacer Financial

CHIM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHIM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, CHIM is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pacer Financial

Risk-Adjusted Performance

0 of 100

Strong

Over the last 90 days Pacer Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly uncertain basic indicators, Pacer Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHIM and Pacer Financial

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

The idea behind CHIM and Pacer Financial 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.