Correlation Between CHIU and CHIS
Can any of the company-specific risk be diversified away by investing in both CHIU and CHIS 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 CHIU and CHIS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHIU and CHIS, you can compare the effects of market volatilities on CHIU and CHIS 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 CHIU with a short position of CHIS. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHIU and CHIS.
Diversification Opportunities for CHIU and CHIS
Poor diversification
The 3 months correlation between CHIU and CHIS is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding CHIU and CHIS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHIS and CHIU 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 CHIU are associated (or correlated) with CHIS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHIS has no effect on the direction of CHIU i.e., CHIU and CHIS go up and down completely randomly.
Pair Corralation between CHIU and CHIS
If you would invest 1,981 in CHIS on September 3, 2024 and sell it today you would earn a total of 0.00 from holding CHIS 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 |
CHIU vs. CHIS
Performance |
| Timeline |
| CHIU |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| CHIS |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
CHIU and CHIS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHIU and CHIS
The main advantage of trading using opposite CHIU and CHIS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHIU position performs unexpectedly, CHIS 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 CHIS will offset losses from the drop in CHIS's long position.The idea behind CHIU and CHIS 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.| CHIS vs. Franklin FTSE South | CHIS vs. Franklin FTSE Japan | CHIS vs. Franklin FTSE India | CHIS 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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