Correlation Between Chimera Investment and DigitalBridge

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

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

Diversification Opportunities for Chimera Investment and DigitalBridge

0.03

Correlation Coefficient

Chimera Investment  DigitalBridge

Significant diversification

The 3 months correlation between Chimera and DigitalBridge is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Chimera Investment and DigitalBridge Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigitalBridge Group and Chimera Investment 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 Chimera Investment are associated (or correlated) with DigitalBridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigitalBridge Group has no effect on the direction of Chimera Investment i.e., Chimera Investment and DigitalBridge go up and down completely randomly.

Pair Corralation between Chimera Investment and DigitalBridge

Assuming the 90 days trading horizon Chimera Investment is expected to generate 0.66 times more return on investment than DigitalBridge. However, Chimera Investment is 1.51 times less risky than DigitalBridge. It trades about 0.09 of its potential returns per unit of risk. DigitalBridge Group is currently generating about -0.08 per unit of risk. If you would invest  2,452  in Chimera Investment on September 14, 2024 and sell it today you would earn a total of  15.00  from holding Chimera Investment or generate 0.61% return on investment over 90 days.

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

Chimera Investment  vs.  DigitalBridge Group

Chimera Investment

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chimera Investment are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Chimera Investment is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

DigitalBridge Group

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DigitalBridge Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady forward-looking indicators, DigitalBridge is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Chimera Investment and DigitalBridge

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

The idea behind Chimera Investment and DigitalBridge Group 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.