Correlation Between Chia and BridgeBio Pharma

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

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

Diversification Opportunities for Chia and BridgeBio Pharma

-0.51

Correlation Coefficient

Chia  BridgeBio Pharma

Excellent diversification

The 3 months correlation between Chia and BridgeBio is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Chia and BridgeBio Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BridgeBio Pharma and Chia 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 Chia are associated (or correlated) with BridgeBio Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BridgeBio Pharma has no effect on the direction of Chia i.e., Chia and BridgeBio Pharma go up and down completely randomly.

Pair Corralation between Chia and BridgeBio Pharma

Assuming the 90 days trading horizon Chia is expected to under-perform the BridgeBio Pharma. In addition to that, Chia is 1.6 times more volatile than BridgeBio Pharma. It trades about -0.12 of its total potential returns per unit of risk. BridgeBio Pharma is currently generating about 0.11 per unit of volatility. If you would invest  2,777  in BridgeBio Pharma on December 21, 2024 and sell it today you would earn a total of  614.00  from holding BridgeBio Pharma or generate 22.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Chia  vs.  BridgeBio Pharma

Chia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Chia shareholders.

BridgeBio Pharma

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BridgeBio Pharma are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, BridgeBio Pharma displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chia and BridgeBio Pharma

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

The idea behind Chia and BridgeBio Pharma 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.