Correlation Between Emerald Growth and Chesapeake Growth

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

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

Diversification Opportunities for Emerald Growth and Chesapeake Growth

0.95

Correlation Coefficient

Emerald Growth  Chesapeake Growth

Almost no diversification

The 3 months correlation between Emerald and Chesapeake is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Emerald Growth Fund and The Chesapeake Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Growth and Emerald Growth 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 Emerald Growth Fund are associated (or correlated) with Chesapeake Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Growth has no effect on the direction of Emerald Growth i.e., Emerald Growth and Chesapeake Growth go up and down completely randomly.

Pair Corralation between Emerald Growth and Chesapeake Growth

Assuming the 90 days horizon Emerald Growth Fund is expected to generate 1.94 times more return on investment than Chesapeake Growth. However, Emerald Growth is 1.94 times more volatile than The Chesapeake Growth. It trades about 0.17 of its potential returns per unit of risk. The Chesapeake Growth is currently generating about 0.14 per unit of risk. If you would invest  2,333  in Emerald Growth Fund on September 12, 2024 and sell it today you would earn a total of  334.00  from holding Emerald Growth Fund or generate 14.32% return on investment over 90 days.

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

Emerald Growth Fund  vs.  The Chesapeake Growth

Emerald Growth

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emerald Growth Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Emerald Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Chesapeake Growth

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Emerald Growth and Chesapeake Growth

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

The idea behind Emerald Growth Fund and The Chesapeake Growth 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.