Correlation Between Ionet and Chubb
Can any of the company-specific risk be diversified away by investing in both Ionet and Chubb 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 Ionet and Chubb into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ionet and Chubb, you can compare the effects of market volatilities on Ionet and Chubb 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 Ionet with a short position of Chubb. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ionet and Chubb.
Diversification Opportunities for Ionet and Chubb
Significant diversification
The 3 months correlation between Ionet and Chubb is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding ionet and Chubb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chubb and Ionet 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 ionet are associated (or correlated) with Chubb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chubb has no effect on the direction of Ionet i.e., Ionet and Chubb go up and down completely randomly.
Pair Corralation between Ionet and Chubb
Assuming the 90 days horizon ionet is expected to generate 6.23 times more return on investment than Chubb. However, Ionet is 6.23 times more volatile than Chubb. It trades about 0.22 of its potential returns per unit of risk. Chubb is currently generating about 0.02 per unit of risk. If you would invest 150.00 in ionet on September 3, 2024 and sell it today you would earn a total of 197.00 from holding ionet or generate 131.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.46% |
| Values | Daily Returns |
ionet vs. Chubb
Performance |
| Timeline |
| ionet |
| Chubb |
Ionet and Chubb Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ionet and Chubb
The main advantage of trading using opposite Ionet and Chubb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ionet position performs unexpectedly, Chubb 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 Chubb will offset losses from the drop in Chubb's long position.The idea behind ionet and Chubb 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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