Correlation Between ABBC and CHESS
Can any of the company-specific risk be diversified away by investing in both ABBC and CHESS 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 ABBC and CHESS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABBC and CHESS, you can compare the effects of market volatilities on ABBC and CHESS 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 ABBC with a short position of CHESS. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABBC and CHESS.
Diversification Opportunities for ABBC and CHESS
Very good diversification
The 3 months correlation between ABBC and CHESS is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding ABBC and CHESS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHESS and ABBC 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 ABBC are associated (or correlated) with CHESS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHESS has no effect on the direction of ABBC i.e., ABBC and CHESS go up and down completely randomly.
Pair Corralation between ABBC and CHESS
Assuming the 90 days trading horizon ABBC is expected to under-perform the CHESS. But the crypto coin apears to be less risky and, when comparing its historical volatility, ABBC is 1.06 times less risky than CHESS. The crypto coin trades about -0.25 of its potential returns per unit of risk. The CHESS is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 26.00 in CHESS on January 18, 2024 and sell it today you would lose (6.00) from holding CHESS or give up 23.08% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
ABBC vs. CHESS
Performance |
Timeline |
ABBC |
CHESS |
ABBC and CHESS Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ABBC and CHESS
The main advantage of trading using opposite ABBC and CHESS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABBC position performs unexpectedly, CHESS 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 CHESS will offset losses from the drop in CHESS's long position.The idea behind ABBC and CHESS 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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