Correlation Between River and Chrysalis Investments

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

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

Diversification Opportunities for River and Chrysalis Investments

0.94

Correlation Coefficient

River  Chrysalis Investments

Almost no diversification

The 3 months correlation between River and Chrysalis is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding River and Mercantile and Chrysalis Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chrysalis Investments and River 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 River and Mercantile are associated (or correlated) with Chrysalis Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chrysalis Investments has no effect on the direction of River i.e., River and Chrysalis Investments go up and down completely randomly.

Pair Corralation between River and Chrysalis Investments

Assuming the 90 days trading horizon River is expected to generate 1.05 times less return on investment than Chrysalis Investments. But when comparing it to its historical volatility, River and Mercantile is 1.0 times less risky than Chrysalis Investments. It trades about 0.26 of its potential returns per unit of risk. Chrysalis Investments is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  9,180  in Chrysalis Investments on April 20, 2025 and sell it today you would earn a total of  2,020  from holding Chrysalis Investments or generate 22.0% return on investment over 90 days.

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

River and Mercantile  vs.  Chrysalis Investments

River and Mercantile

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in River and Mercantile are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, River unveiled solid returns over the last few months and may actually be approaching a breakup point.

Chrysalis Investments

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chrysalis Investments are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Chrysalis Investments unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with River and Chrysalis Investments

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

The idea behind River and Mercantile and Chrysalis Investments 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.