Correlation Between DigitalBridge and Chimera Investment

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

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

Diversification Opportunities for DigitalBridge and Chimera Investment

0.03

Correlation Coefficient

DigitalBridge  Chimera Investment

Significant diversification

The 3 months correlation between DigitalBridge and Chimera is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding DigitalBridge Group and Chimera Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chimera Investment and DigitalBridge 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 DigitalBridge Group are associated (or correlated) with Chimera Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chimera Investment has no effect on the direction of DigitalBridge i.e., DigitalBridge and Chimera Investment go up and down completely randomly.

Pair Corralation between DigitalBridge and Chimera Investment

Assuming the 90 days trading horizon DigitalBridge is expected to generate 1.3 times less return on investment than Chimera Investment. In addition to that, DigitalBridge is 2.19 times more volatile than Chimera Investment. It trades about 0.04 of its total potential returns per unit of risk. Chimera Investment is currently generating about 0.11 per unit of volatility. If you would invest  2,436  in Chimera Investment on November 20, 2024 and sell it today you would earn a total of  57.00  from holding Chimera Investment or generate 2.34% return on investment over 90 days.

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

DigitalBridge Group  vs.  Chimera Investment

DigitalBridge Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DigitalBridge Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, DigitalBridge is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Chimera Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chimera Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with DigitalBridge and Chimera Investment

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

The idea behind DigitalBridge Group and Chimera Investment 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.