Correlation Between GRIN and Chroma

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

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

Diversification Opportunities for GRIN and Chroma

-0.34

Correlation Coefficient

GRIN  Chroma

Very good diversification

The 3 months correlation between GRIN and Chroma is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding GRIN and Chroma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chroma and GRIN 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 GRIN are associated (or correlated) with Chroma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chroma has no effect on the direction of GRIN i.e., GRIN and Chroma go up and down completely randomly.

Pair Corralation between GRIN and Chroma

Assuming the 90 days trading horizon GRIN is expected to generate 1.06 times more return on investment than Chroma. However, GRIN is 1.06 times more volatile than Chroma. It trades about -0.14 of its potential returns per unit of risk. Chroma is currently generating about -0.34 per unit of risk. If you would invest  6.06  in GRIN on January 26, 2024 and sell it today you would lose (1.01) from holding GRIN or give up 16.67% of portfolio value over 90 days.

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

GRIN  vs.  Chroma

GRIN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GRIN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for GRIN shareholders.

Chroma

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chroma are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Chroma exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GRIN and Chroma

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

The idea behind GRIN and Chroma 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.