Correlation Between Chainflip and DIA

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

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

Diversification Opportunities for Chainflip and DIA

0.4

Correlation Coefficient

Chainflip  DIA

Very weak diversification

The 3 months correlation between Chainflip and DIA is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Chainflip and DIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIA and Chainflip 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 Chainflip are associated (or correlated) with DIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIA has no effect on the direction of Chainflip i.e., Chainflip and DIA go up and down completely randomly.

Pair Corralation between Chainflip and DIA

Assuming the 90 days trading horizon Chainflip is expected to generate 1.71 times less return on investment than DIA. In addition to that, Chainflip is 1.1 times more volatile than DIA. It trades about 0.04 of its total potential returns per unit of risk. DIA is currently generating about 0.08 per unit of volatility. If you would invest  28.00  in DIA on September 14, 2024 and sell it today you would earn a total of  62.00  from holding DIA or generate 221.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	49.66%
Values	Daily Returns

Chainflip  vs.  DIA

Chainflip

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chainflip are ranked lower than 12 (%) 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.

DIA

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Chainflip and DIA

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

The idea behind Chainflip and DIA 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 Global Correlations module to find global opportunities by holding instruments from different markets.