Correlation Between Chestnut Street and Money Market
Can any of the company-specific risk be diversified away by investing in both Chestnut Street and Money Market 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 Chestnut Street and Money Market into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chestnut Street Exchange and Money Market Obligations, you can compare the effects of market volatilities on Chestnut Street and Money Market 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 Chestnut Street with a short position of Money Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chestnut Street and Money Market.
Diversification Opportunities for Chestnut Street and Money Market
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chestnut and Money is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Chestnut Street Exchange and Money Market Obligations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Money Market Obligations and Chestnut Street 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 Chestnut Street Exchange are associated (or correlated) with Money Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Money Market Obligations has no effect on the direction of Chestnut Street i.e., Chestnut Street and Money Market go up and down completely randomly.
Pair Corralation between Chestnut Street and Money Market
Assuming the 90 days horizon Chestnut Street is expected to generate 21.41 times less return on investment than Money Market. But when comparing it to its historical volatility, Chestnut Street Exchange is 38.12 times less risky than Money Market. It trades about 0.09 of its potential returns per unit of risk. Money Market Obligations is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 91.00 in Money Market Obligations on August 27, 2024 and sell it today you would earn a total of 9.00 from holding Money Market Obligations or generate 9.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Chestnut Street Exchange vs. Money Market Obligations
Performance |
| Timeline |
| Chestnut Street Exchange |
| Money Market Obligations |
Chestnut Street and Money Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chestnut Street and Money Market
The main advantage of trading using opposite Chestnut Street and Money Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chestnut Street position performs unexpectedly, Money Market 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 Money Market will offset losses from the drop in Money Market's long position.| Chestnut Street vs. Vanguard Total Stock | Chestnut Street vs. Vanguard 500 Index | Chestnut Street vs. Vanguard Total Stock | Chestnut Street vs. Vanguard Total Stock |
| Money Market vs. Vanguard Total Stock | Money Market vs. Vanguard 500 Index | Money Market vs. Vanguard Total Stock | Money Market vs. Vanguard Total Stock |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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