Correlation Between EM and CHESS

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

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

Diversification Opportunities for EM and CHESS

0.0

Correlation Coefficient

EM  CHESS

Pay attention - limited upside

The 3 months correlation between EM and CHESS is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding EM and CHESS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHESS 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 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 EM i.e., EM and CHESS go up and down completely randomly.

Pair Corralation between EM and CHESS

If you would invest  16.00  in CHESS on April 22, 2025 and sell it today you would lose (7.51) from holding CHESS or give up 46.94% of portfolio value over 90 days.

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

EM  vs.  CHESS

EM

Risk-Adjusted Performance

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.

CHESS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHESS are ranked lower than 7 (%) 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 EM and CHESS

The main advantage of trading using opposite EM and CHESS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EM 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 EM 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .