Correlation Between ARK and CHSB

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

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

Diversification Opportunities for ARK and CHSB

0.0

Correlation Coefficient

ARK  CHSB

Pay attention - limited upside

The 3 months correlation between ARK and CHSB is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ARK and CHSB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHSB and ARK 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 ARK 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 ARK i.e., ARK and CHSB go up and down completely randomly.

Pair Corralation between ARK and CHSB

Assuming the 90 days trading horizon ARK is expected to generate 1.76 times more return on investment than CHSB. However, ARK is 1.76 times more volatile than CHSB. It trades about 0.04 of its potential returns per unit of risk. CHSB is currently generating about 0.0 per unit of risk. If you would invest  55.00  in ARK on February 12, 2024 and sell it today you would earn a total of  29.00  from holding ARK or generate 52.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	89.71%
Values	Daily Returns

ARK  vs.  CHSB

ARK

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ARK are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking signals, ARK may actually be approaching a critical reversion point that can send shares even higher in June 2024.

CHSB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHSB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CHSB is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ARK and CHSB

The main advantage of trading using opposite ARK and CHSB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARK 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 ARK 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.