Correlation Between Chia and Sriwahana

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

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

Diversification Opportunities for Chia and Sriwahana

-0.37

Correlation Coefficient

Chia  Sriwahana

Very good diversification

The 3 months correlation between Chia and Sriwahana is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Chia and Sriwahana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sriwahana 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 Sriwahana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sriwahana has no effect on the direction of Chia i.e., Chia and Sriwahana go up and down completely randomly.

Pair Corralation between Chia and Sriwahana

Assuming the 90 days trading horizon Chia is expected to generate 1.87 times more return on investment than Sriwahana. However, Chia is 1.87 times more volatile than Sriwahana. It trades about 0.12 of its potential returns per unit of risk. Sriwahana is currently generating about -0.11 per unit of risk. If you would invest  1,504  in Chia on October 11, 2024 and sell it today you would earn a total of  641.00  from holding Chia or generate 42.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.37%
Values	Daily Returns

Chia  vs.  Sriwahana

Chia

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chia are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Chia exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sriwahana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sriwahana has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Chia and Sriwahana

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

The idea behind Chia and Sriwahana 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.