Correlation Between CHESS and JUST

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

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

Diversification Opportunities for CHESS and JUST

0.7

Correlation Coefficient

CHESS  JUST

Poor diversification

The 3 months correlation between CHESS and JUST is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding CHESS and JUST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JUST and CHESS 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 CHESS are associated (or correlated) with JUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JUST has no effect on the direction of CHESS i.e., CHESS and JUST go up and down completely randomly.

Pair Corralation between CHESS and JUST

Assuming the 90 days trading horizon CHESS is expected to generate 2.02 times more return on investment than JUST. However, CHESS is 2.02 times more volatile than JUST. It trades about 0.11 of its potential returns per unit of risk. JUST is currently generating about 0.16 per unit of risk. If you would invest  16.00  in CHESS on September 2, 2024 and sell it today you would earn a total of  6.00  from holding CHESS or generate 37.5% return on investment over 90 days.

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

CHESS  vs.  JUST

CHESS

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CHESS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, CHESS exhibited solid returns over the last few months and may actually be approaching a breakup point.

JUST

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JUST are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, JUST exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHESS and JUST

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

The idea behind CHESS and JUST 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 CEOs Directory module to screen CEOs from public companies around the world.