Correlation Between AE and CHESS

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

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

Diversification Opportunities for AE and CHESS

-0.2

Correlation Coefficient

AE  CHESS

Good diversification

The 3 months correlation between AE and CHESS is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding AE and CHESS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHESS and AE 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 AE are associated (or correlated) with CHESS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHESS has no effect on the direction of AE i.e., AE and CHESS go up and down completely randomly.

Pair Corralation between AE and CHESS

Assuming the 90 days horizon AE is expected to under-perform the CHESS. But the crypto coin apears to be less risky and, when comparing its historical volatility, AE is 1.14 times less risky than CHESS. The crypto coin trades about -0.13 of its potential returns per unit of risk. The CHESS is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7.19  in CHESS on April 24, 2025 and sell it today you would earn a total of  1.30  from holding CHESS or generate 18.08% return on investment over 90 days.

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

AE  vs.  CHESS

AE

Risk-Adjusted Performance

Very Weak

Over the last 90 days AE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in August 2025. The latest tumult may also be a sign of longer-term up-swing for AE shareholders.

CHESS

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CHESS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, CHESS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AE and CHESS

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

The idea behind AE and CHESS 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.