Correlation Between AKRO and CHP

Can any of the company-specific risk be diversified away by investing in both AKRO and CHP 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 AKRO and CHP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AKRO and CHP, you can compare the effects of market volatilities on AKRO and CHP 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 AKRO with a short position of CHP. Check out your portfolio center. Please also check ongoing floating volatility patterns of AKRO and CHP.

Diversification Opportunities for AKRO and CHP

-0.59

Correlation Coefficient

AKRO  CHP

Excellent diversification

The 3 months correlation between AKRO and CHP is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding AKRO and CHP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHP and AKRO 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 AKRO are associated (or correlated) with CHP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHP has no effect on the direction of AKRO i.e., AKRO and CHP go up and down completely randomly.

Pair Corralation between AKRO and CHP

Assuming the 90 days trading horizon AKRO is expected to generate 3.08 times less return on investment than CHP. But when comparing it to its historical volatility, AKRO is 3.75 times less risky than CHP. It trades about 0.06 of its potential returns per unit of risk. CHP is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.64  in CHP on January 24, 2024 and sell it today you would lose (0.62) from holding CHP or give up 97.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

AKRO  vs.  CHP

AKRO

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AKRO are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, AKRO exhibited solid returns over the last few months and may actually be approaching a breakup point.

CHP

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CHP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, CHP exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AKRO and CHP

The main advantage of trading using opposite AKRO and CHP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AKRO position performs unexpectedly, CHP 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 CHP will offset losses from the drop in CHP's long position.

The idea behind AKRO and CHP 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.