Correlation Between CHIS and CHIU

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

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

Diversification Opportunities for CHIS and CHIU

0.61

Correlation Coefficient

CHIS  CHIU

Poor diversification

The 3 months correlation between CHIS and CHIU is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding CHIS and CHIU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHIU and CHIS 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 CHIS are associated (or correlated) with CHIU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHIU has no effect on the direction of CHIS i.e., CHIS and CHIU go up and down completely randomly.

Pair Corralation between CHIS and CHIU

Given the investment horizon of 90 days CHIS is expected to under-perform the CHIU. In addition to that, CHIS is 1.01 times more volatile than CHIU. It trades about -0.06 of its total potential returns per unit of risk. CHIU is currently generating about -0.04 per unit of volatility. If you would invest  1,421  in CHIU on September 20, 2024 and sell it today you would lose (127.00) from holding CHIU or give up 8.94% of portfolio value over 90 days.

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

CHIS  vs.  CHIU

CHIS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHIS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, CHIS is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

CHIU

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHIU has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, CHIU is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CHIS and CHIU

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

The idea behind CHIS and CHIU 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.