Correlation Between EM and Chainflip

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

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

Diversification Opportunities for EM and Chainflip

0.0

Correlation Coefficient

EM  Chainflip

Pay attention - limited upside

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

Pair Corralation between EM and Chainflip

Assuming the 90 days horizon EM is expected to under-perform the Chainflip. But the crypto coin apears to be less risky and, when comparing its historical volatility, EM is 1.37 times less risky than Chainflip. The crypto coin trades about -0.04 of its potential returns per unit of risk. The Chainflip is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  232.00  in Chainflip on September 14, 2024 and sell it today you would lose (50.00) from holding Chainflip or give up 21.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	49.83%
Values	Daily Returns

EM  vs.  Chainflip

EM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, EM is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Chainflip

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chainflip are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Chainflip exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EM and Chainflip

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

The idea behind EM and Chainflip 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.