Correlation Between CHIS and CHIK
Can any of the company-specific risk be diversified away by investing in both CHIS and CHIK 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 CHIS and CHIK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHIS and CHIK, you can compare the effects of market volatilities on CHIS and CHIK 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 CHIS with a short position of CHIK. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHIS and CHIK.
Diversification Opportunities for CHIS and CHIK
Poor diversification
The 3 months correlation between CHIS and CHIK is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding CHIS and CHIK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHIK and CHIS 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 CHIS are associated (or correlated) with CHIK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHIK has no effect on the direction of CHIS i.e., CHIS and CHIK go up and down completely randomly.
Pair Corralation between CHIS and CHIK
If you would invest 1,629 in CHIK on September 5, 2024 and sell it today you would earn a total of 0.00 from holding CHIK or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHIS vs. CHIK
Performance |
| Timeline |
| CHIS |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| CHIK |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
CHIS and CHIK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHIS and CHIK
The main advantage of trading using opposite CHIS and CHIK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHIS position performs unexpectedly, CHIK 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 CHIK will offset losses from the drop in CHIK's long position.The idea behind CHIS and CHIK 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.| CHIK vs. Franklin FTSE South | CHIK vs. Franklin FTSE Japan | CHIK vs. Franklin FTSE India | CHIK vs. Franklin FTSE Brazil |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities |