Correlation Between Chatham Rock and Emera

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

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

Diversification Opportunities for Chatham Rock and Emera

0.53

Correlation Coefficient

Chatham Rock  Emera

Very weak diversification

The 3 months correlation between Chatham and Emera is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Chatham Rock Phosphate and Emera Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emera Inc and Chatham Rock 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 Chatham Rock Phosphate are associated (or correlated) with Emera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emera Inc has no effect on the direction of Chatham Rock i.e., Chatham Rock and Emera go up and down completely randomly.

Pair Corralation between Chatham Rock and Emera

Assuming the 90 days horizon Chatham Rock Phosphate is expected to generate 14.54 times more return on investment than Emera. However, Chatham Rock is 14.54 times more volatile than Emera Inc. It trades about 0.02 of its potential returns per unit of risk. Emera Inc is currently generating about 0.01 per unit of risk. If you would invest  8.00  in Chatham Rock Phosphate on September 23, 2024 and sell it today you would lose (1.50) from holding Chatham Rock Phosphate or give up 18.75% of portfolio value over 90 days.

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

Chatham Rock Phosphate  vs.  Emera Inc

Chatham Rock Phosphate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chatham Rock Phosphate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chatham Rock is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Emera Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emera Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Emera is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chatham Rock and Emera

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

The idea behind Chatham Rock Phosphate and Emera Inc 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.