Correlation Between Caledonia Investments and Chrysalis Investments

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

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

Diversification Opportunities for Caledonia Investments and Chrysalis Investments

0.84

Correlation Coefficient

Caledonia Investments  Chrysalis Investments

Very poor diversification

The 3 months correlation between Caledonia and Chrysalis is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Investments and Chrysalis Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chrysalis Investments and Caledonia Investments 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 Caledonia Investments are associated (or correlated) with Chrysalis Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chrysalis Investments has no effect on the direction of Caledonia Investments i.e., Caledonia Investments and Chrysalis Investments go up and down completely randomly.

Pair Corralation between Caledonia Investments and Chrysalis Investments

Assuming the 90 days trading horizon Caledonia Investments is expected to generate 2.56 times less return on investment than Chrysalis Investments. But when comparing it to its historical volatility, Caledonia Investments is 1.63 times less risky than Chrysalis Investments. It trades about 0.09 of its potential returns per unit of risk. Chrysalis Investments is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  9,300  in Chrysalis Investments on October 9, 2024 and sell it today you would earn a total of  1,200  from holding Chrysalis Investments or generate 12.9% return on investment over 90 days.

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

Caledonia Investments  vs.  Chrysalis Investments

Caledonia Investments

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caledonia Investments are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Caledonia Investments is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Chrysalis Investments

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chrysalis Investments are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Chrysalis Investments unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caledonia Investments and Chrysalis Investments

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

The idea behind Caledonia Investments and Chrysalis Investments 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.

Check out your portfolio center.

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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.