Correlation Between Chesapeake Utilities and CARSALESCOM
Can any of the company-specific risk be diversified away by investing in both Chesapeake Utilities and CARSALESCOM 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 Chesapeake Utilities and CARSALESCOM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chesapeake Utilities and CARSALESCOM, you can compare the effects of market volatilities on Chesapeake Utilities and CARSALESCOM 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 Chesapeake Utilities with a short position of CARSALESCOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chesapeake Utilities and CARSALESCOM.
Diversification Opportunities for Chesapeake Utilities and CARSALESCOM
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Chesapeake and CARSALESCOM is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Utilities and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM and Chesapeake Utilities 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 Chesapeake Utilities are associated (or correlated) with CARSALESCOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of Chesapeake Utilities i.e., Chesapeake Utilities and CARSALESCOM go up and down completely randomly.
Pair Corralation between Chesapeake Utilities and CARSALESCOM
Assuming the 90 days horizon Chesapeake Utilities is expected to generate 0.97 times more return on investment than CARSALESCOM. However, Chesapeake Utilities is 1.03 times less risky than CARSALESCOM. It trades about 0.05 of its potential returns per unit of risk. CARSALESCOM is currently generating about -0.05 per unit of risk. If you would invest 11,044 in Chesapeake Utilities on September 29, 2024 and sell it today you would earn a total of 456.00 from holding Chesapeake Utilities or generate 4.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chesapeake Utilities vs. CARSALESCOM
Performance |
| Timeline |
| Chesapeake Utilities |
| CARSALESCOM |
Chesapeake Utilities and CARSALESCOM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chesapeake Utilities and CARSALESCOM
The main advantage of trading using opposite Chesapeake Utilities and CARSALESCOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chesapeake Utilities position performs unexpectedly, CARSALESCOM 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 CARSALESCOM will offset losses from the drop in CARSALESCOM's long position.| Chesapeake Utilities vs. Snam SpA | Chesapeake Utilities vs. Atmos Energy | Chesapeake Utilities vs. China Resources Gas | Chesapeake Utilities vs. Tokyo Gas CoLtd |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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