Correlation Between CHP and Automata

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

Diversification Opportunities for CHP and Automata

-0.53
  Correlation Coefficient

Excellent diversification

The 3 months correlation between CHP and Automata is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding CHP and Automata in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automata and CHP 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 CHP are associated (or correlated) with Automata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automata has no effect on the direction of CHP i.e., CHP and Automata go up and down completely randomly.

Pair Corralation between CHP and Automata

Assuming the 90 days trading horizon CHP is expected to under-perform the Automata. In addition to that, CHP is 2.28 times more volatile than Automata. It trades about -0.2 of its total potential returns per unit of risk. Automata is currently generating about 0.15 per unit of volatility. If you would invest  15.00  in Automata on December 30, 2023 and sell it today you would earn a total of  3.00  from holding Automata or generate 20.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

CHP  vs.  Automata

 Performance 
       Timeline  
CHP 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in CHP are ranked lower than 5 (%) 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.
Automata 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Automata are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Automata exhibited solid returns over the last few months and may actually be approaching a breakup point.

CHP and Automata Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CHP and Automata

The main advantage of trading using opposite CHP and Automata positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHP position performs unexpectedly, Automata 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 Automata will offset losses from the drop in Automata's long position.
The idea behind CHP and Automata 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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