Correlation Between Chestnut Street and Arrow Dwa

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

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

Diversification Opportunities for Chestnut Street and Arrow Dwa

0.58

Correlation Coefficient

Chestnut Street  Arrow Dwa

Very weak diversification

The 3 months correlation between Chestnut and Arrow is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Chestnut Street Exchange and Arrow Dwa Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Dwa Balanced and Chestnut Street 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 Chestnut Street Exchange are associated (or correlated) with Arrow Dwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Dwa Balanced has no effect on the direction of Chestnut Street i.e., Chestnut Street and Arrow Dwa go up and down completely randomly.

Pair Corralation between Chestnut Street and Arrow Dwa

Assuming the 90 days horizon Chestnut Street Exchange is expected to generate 1.34 times more return on investment than Arrow Dwa. However, Chestnut Street is 1.34 times more volatile than Arrow Dwa Balanced. It trades about 0.01 of its potential returns per unit of risk. Arrow Dwa Balanced is currently generating about -0.07 per unit of risk. If you would invest  112,351  in Chestnut Street Exchange on October 6, 2024 and sell it today you would earn a total of  232.00  from holding Chestnut Street Exchange or generate 0.21% return on investment over 90 days.

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

Chestnut Street Exchange  vs.  Arrow Dwa Balanced

Chestnut Street Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chestnut Street Exchange has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Chestnut Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Arrow Dwa Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arrow Dwa Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Arrow Dwa is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chestnut Street and Arrow Dwa

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

The idea behind Chestnut Street Exchange and Arrow Dwa Balanced 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.