Correlation Between Chimera Investment and Cherry Hill

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

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

Diversification Opportunities for Chimera Investment and Cherry Hill

-0.13

Correlation Coefficient

Chimera Investment  Cherry Hill

Good diversification

The 3 months correlation between Chimera and Cherry is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Chimera Investment and Cherry Hill Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cherry Hill Mortgage and Chimera Investment 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 Chimera Investment are associated (or correlated) with Cherry Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cherry Hill Mortgage has no effect on the direction of Chimera Investment i.e., Chimera Investment and Cherry Hill go up and down completely randomly.

Pair Corralation between Chimera Investment and Cherry Hill

Assuming the 90 days trading horizon Chimera Investment is expected to under-perform the Cherry Hill. But the preferred stock apears to be less risky and, when comparing its historical volatility, Chimera Investment is 1.3 times less risky than Cherry Hill. The preferred stock trades about -0.06 of its potential returns per unit of risk. The Cherry Hill Mortgage is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,415  in Cherry Hill Mortgage on December 31, 2024 and sell it today you would earn a total of  48.00  from holding Cherry Hill Mortgage or generate 1.99% return on investment over 90 days.

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

Chimera Investment  vs.  Cherry Hill Mortgage

Chimera Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chimera Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Chimera Investment is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Cherry Hill Mortgage

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cherry Hill Mortgage are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Cherry Hill is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chimera Investment and Cherry Hill

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

The idea behind Chimera Investment and Cherry Hill Mortgage 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.