Correlation Between CHIM and PGAL

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

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

Diversification Opportunities for CHIM and PGAL

0.0

Correlation Coefficient

CHIM  PGAL

Pay attention - limited upside

The 3 months correlation between CHIM and PGAL is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CHIM and PGAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGAL 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 PGAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGAL has no effect on the direction of CHIM i.e., CHIM and PGAL go up and down completely randomly.

Pair Corralation between CHIM and PGAL

Given the investment horizon of 90 days CHIM is expected to under-perform the PGAL. In addition to that, CHIM is 1.46 times more volatile than PGAL. It trades about -0.09 of its total potential returns per unit of risk. PGAL is currently generating about 0.06 per unit of volatility. If you would invest  1,006  in PGAL on October 25, 2024 and sell it today you would earn a total of  65.00  from holding PGAL or generate 6.46% return on investment over 90 days.

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

CHIM  vs.  PGAL

CHIM

Risk-Adjusted Performance

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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 current stock price disarray, may contribute to short-term losses for the investors.

PGAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PGAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, PGAL is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with CHIM and PGAL

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

The idea behind CHIM and PGAL 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.