Correlation Between Chestnut Street and Ridgeworth Ceredex

Can any of the company-specific risk be diversified away by investing in both Chestnut Street and Ridgeworth Ceredex 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 Ridgeworth Ceredex 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 Ridgeworth Ceredex Small, you can compare the effects of market volatilities on Chestnut Street and Ridgeworth Ceredex 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 Ridgeworth Ceredex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chestnut Street and Ridgeworth Ceredex.

Diversification Opportunities for Chestnut Street and Ridgeworth Ceredex

0.92

Correlation Coefficient

Chestnut Street  Ridgeworth Ceredex

Almost no diversification

The 3 months correlation between Chestnut and Ridgeworth is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Chestnut Street Exchange and Ridgeworth Ceredex Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ridgeworth Ceredex Small 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 Ridgeworth Ceredex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ridgeworth Ceredex Small has no effect on the direction of Chestnut Street i.e., Chestnut Street and Ridgeworth Ceredex go up and down completely randomly.

Pair Corralation between Chestnut Street and Ridgeworth Ceredex

Assuming the 90 days horizon Chestnut Street is expected to generate 1.01 times less return on investment than Ridgeworth Ceredex. But when comparing it to its historical volatility, Chestnut Street Exchange is 1.86 times less risky than Ridgeworth Ceredex. It trades about 0.22 of its potential returns per unit of risk. Ridgeworth Ceredex Small is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  849.00  in Ridgeworth Ceredex Small on September 2, 2024 and sell it today you would earn a total of  74.00  from holding Ridgeworth Ceredex Small or generate 8.72% return on investment over 90 days.

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

Chestnut Street Exchange  vs.  Ridgeworth Ceredex Small

Chestnut Street Exchange

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chestnut Street Exchange are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Chestnut Street may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ridgeworth Ceredex Small

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ridgeworth Ceredex Small are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ridgeworth Ceredex may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Chestnut Street and Ridgeworth Ceredex

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

The idea behind Chestnut Street Exchange and Ridgeworth Ceredex Small 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.