Correlation Between CSL and ChitogenX

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

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

Diversification Opportunities for CSL and ChitogenX

-0.55

Correlation Coefficient

CSL  ChitogenX

Excellent diversification

The 3 months correlation between CSL and ChitogenX is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding CSL and ChitogenX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChitogenX and CSL 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 CSL are associated (or correlated) with ChitogenX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChitogenX has no effect on the direction of CSL i.e., CSL and ChitogenX go up and down completely randomly.

Pair Corralation between CSL and ChitogenX

Assuming the 90 days horizon CSL is expected to generate 0.08 times more return on investment than ChitogenX. However, CSL is 12.11 times less risky than ChitogenX. It trades about -0.25 of its potential returns per unit of risk. ChitogenX is currently generating about -0.22 per unit of risk. If you would invest  8,875  in CSL on October 25, 2024 and sell it today you would lose (416.00) from holding CSL or give up 4.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	85.71%
Values	Daily Returns

CSL  vs.  ChitogenX

CSL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ChitogenX

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ChitogenX are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ChitogenX reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CSL and ChitogenX

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

The idea behind CSL and ChitogenX 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.