Correlation Between Chia and Whitehaven Coal

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

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

Diversification Opportunities for Chia and Whitehaven Coal

-0.43

Correlation Coefficient

Chia  Whitehaven Coal

Very good diversification

The 3 months correlation between Chia and Whitehaven is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Chia and Whitehaven Coal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitehaven Coal 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 Whitehaven Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitehaven Coal has no effect on the direction of Chia i.e., Chia and Whitehaven Coal go up and down completely randomly.

Pair Corralation between Chia and Whitehaven Coal

Assuming the 90 days trading horizon Chia is expected to under-perform the Whitehaven Coal. In addition to that, Chia is 3.32 times more volatile than Whitehaven Coal. It trades about -0.06 of its total potential returns per unit of risk. Whitehaven Coal is currently generating about 0.09 per unit of volatility. If you would invest  609.00  in Whitehaven Coal on October 24, 2024 and sell it today you would earn a total of  19.00  from holding Whitehaven Coal or generate 3.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Chia  vs.  Whitehaven Coal

Chia

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chia are ranked lower than 8 (%) 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.

Whitehaven Coal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whitehaven Coal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Whitehaven Coal is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Chia and Whitehaven Coal

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

The idea behind Chia and Whitehaven Coal 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.