Correlation Between Chestnut Street and Hewitt Money

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

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

Diversification Opportunities for Chestnut Street and Hewitt Money

0.0

Correlation Coefficient

Chestnut Street  Hewitt Money

Pay attention - limited upside

The 3 months correlation between Chestnut and Hewitt is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Chestnut Street Exchange and Hewitt Money Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hewitt Money Market and Chestnut Street 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 Chestnut Street Exchange are associated (or correlated) with Hewitt Money. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hewitt Money Market has no effect on the direction of Chestnut Street i.e., Chestnut Street and Hewitt Money go up and down completely randomly.

Pair Corralation between Chestnut Street and Hewitt Money

Assuming the 90 days horizon Chestnut Street Exchange is expected to generate 4.5 times more return on investment than Hewitt Money. However, Chestnut Street is 4.5 times more volatile than Hewitt Money Market. It trades about 0.11 of its potential returns per unit of risk. Hewitt Money Market is currently generating about 0.05 per unit of risk. If you would invest  106,055  in Chestnut Street Exchange on September 15, 2024 and sell it today you would earn a total of  10,481  from holding Chestnut Street Exchange or generate 9.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Chestnut Street Exchange  vs.  Hewitt Money Market

Chestnut Street Exchange

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chestnut Street Exchange are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Chestnut Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hewitt Money Market

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hewitt Money Market has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Hewitt Money is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chestnut Street and Hewitt Money

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

The idea behind Chestnut Street Exchange and Hewitt Money Market 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.