Correlation Between CHP and DUSK
Can any of the company-specific risk be diversified away by investing in both CHP and DUSK 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 DUSK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHP and DUSK, you can compare the effects of market volatilities on CHP and DUSK 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 DUSK. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHP and DUSK.
Diversification Opportunities for CHP and DUSK
Weak diversification
The 3 months correlation between CHP and DUSK is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding CHP and DUSK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DUSK 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 DUSK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DUSK has no effect on the direction of CHP i.e., CHP and DUSK go up and down completely randomly.
Pair Corralation between CHP and DUSK
Assuming the 90 days trading horizon CHP is expected to generate 1.24 times less return on investment than DUSK. But when comparing it to its historical volatility, CHP is 1.07 times less risky than DUSK. It trades about 0.45 of its potential returns per unit of risk. DUSK is currently generating about 0.52 of returns per unit of risk over similar time horizon. If you would invest 17.00 in DUSK on September 4, 2024 and sell it today you would earn a total of 12.00 from holding DUSK or generate 70.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHP vs. DUSK
Performance |
| Timeline |
| CHP |
| DUSK |
CHP and DUSK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHP and DUSK
The main advantage of trading using opposite CHP and DUSK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHP position performs unexpectedly, DUSK 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 DUSK will offset losses from the drop in DUSK's long position.The idea behind CHP and DUSK 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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