Correlation Between ESSEX and Chicago Atlantic

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

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

Diversification Opportunities for ESSEX and Chicago Atlantic

-0.07

Correlation Coefficient

ESSEX  Chicago Atlantic

Good diversification

The 3 months correlation between ESSEX and Chicago is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding ESSEX PORTFOLIO L and Chicago Atlantic BDC, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chicago Atlantic BDC, and ESSEX 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 ESSEX PORTFOLIO L are associated (or correlated) with Chicago Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chicago Atlantic BDC, has no effect on the direction of ESSEX i.e., ESSEX and Chicago Atlantic go up and down completely randomly.

Pair Corralation between ESSEX and Chicago Atlantic

Assuming the 90 days trading horizon ESSEX PORTFOLIO L is expected to under-perform the Chicago Atlantic. But the bond apears to be less risky and, when comparing its historical volatility, ESSEX PORTFOLIO L is 2.54 times less risky than Chicago Atlantic. The bond trades about -0.22 of its potential returns per unit of risk. The Chicago Atlantic BDC, is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,239  in Chicago Atlantic BDC, on September 25, 2024 and sell it today you would lose (5.50) from holding Chicago Atlantic BDC, or give up 0.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	76.19%
Values	Daily Returns

ESSEX PORTFOLIO L  vs.  Chicago Atlantic BDC,

ESSEX PORTFOLIO L

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESSEX PORTFOLIO L has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ESSEX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Chicago Atlantic BDC,

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chicago Atlantic BDC, are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Chicago Atlantic displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ESSEX and Chicago Atlantic

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

The idea behind ESSEX PORTFOLIO L and Chicago Atlantic BDC, 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..