Correlation Between CHP and AEON
Can any of the company-specific risk be diversified away by investing in both CHP and AEON 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 CHP and AEON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHP and AEON, you can compare the effects of market volatilities on CHP and AEON 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 CHP with a short position of AEON. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHP and AEON.
Diversification Opportunities for CHP and AEON
Very good diversification
The 3 months correlation between CHP and AEON is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding CHP and AEON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEON and CHP 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 CHP are associated (or correlated) with AEON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEON has no effect on the direction of CHP i.e., CHP and AEON go up and down completely randomly.
Pair Corralation between CHP and AEON
Assuming the 90 days trading horizon CHP is expected to generate 3.03 times more return on investment than AEON. However, CHP is 3.03 times more volatile than AEON. It trades about 0.08 of its potential returns per unit of risk. AEON is currently generating about 0.09 per unit of risk. If you would invest 0.36 in CHP on August 25, 2024 and sell it today you would lose (0.36) from holding CHP or give up 99.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHP vs. AEON
Performance |
| Timeline |
| CHP |
| AEON |
CHP and AEON Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHP and AEON
The main advantage of trading using opposite CHP and AEON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHP position performs unexpectedly, AEON 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 AEON will offset losses from the drop in AEON's long position.The idea behind CHP and AEON 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum |