Correlation Between Aragon and CHESS

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Can any of the company-specific risk be diversified away by investing in both Aragon 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 Aragon and CHESS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aragon and CHESS, you can compare the effects of market volatilities on Aragon 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 Aragon with a short position of CHESS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aragon and CHESS.

Diversification Opportunities for Aragon and CHESS

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Aragon and CHESS is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Aragon and CHESS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHESS and Aragon 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 Aragon 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 Aragon i.e., Aragon and CHESS go up and down completely randomly.

Pair Corralation between Aragon and CHESS

Assuming the 90 days trading horizon Aragon is expected to generate 0.82 times more return on investment than CHESS. However, Aragon is 1.22 times less risky than CHESS. It trades about 0.1 of its potential returns per unit of risk. CHESS is currently generating about 0.01 per unit of risk. If you would invest  330.00  in Aragon on January 19, 2024 and sell it today you would earn a total of  470.00  from holding Aragon or generate 142.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Aragon  vs.  CHESS

 Performance 
       Timeline  
Aragon 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Aragon are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Aragon exhibited solid returns over the last few months and may actually be approaching a breakup point.
CHESS 

Risk-Adjusted Performance

4 of 100

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

Aragon and CHESS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aragon and CHESS

The main advantage of trading using opposite Aragon and CHESS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aragon 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 Aragon 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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