Correlation Between Aragon and CHSB

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

By analyzing existing cross correlation between Aragon and CHSB, you can compare the effects of market volatilities on Aragon and CHSB 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 CHSB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aragon and CHSB.

Diversification Opportunities for Aragon and CHSB

0.02

Correlation Coefficient

Aragon  CHSB

Significant diversification

The 3 months correlation between Aragon and CHSB is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Aragon and CHSB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHSB 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 CHSB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHSB has no effect on the direction of Aragon i.e., Aragon and CHSB go up and down completely randomly.

Pair Corralation between Aragon and CHSB

Assuming the 90 days trading horizon Aragon is expected to under-perform the CHSB. But the crypto coin apears to be less risky and, when comparing its historical volatility, Aragon is 3.1 times less risky than CHSB. The crypto coin trades about -0.01 of its potential returns per unit of risk. The CHSB is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  18.00  in CHSB on January 25, 2024 and sell it today you would earn a total of  23.00  from holding CHSB or generate 127.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Aragon  vs.  CHSB

Aragon

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aragon are ranked lower than 9 (%) 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.

CHSB

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Aragon and CHSB

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

The idea behind Aragon and CHSB 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.