Correlation Between Chesapeake Energy and American CuMo
Can any of the company-specific risk be diversified away by investing in both Chesapeake Energy and American CuMo 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 Energy and American CuMo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chesapeake Energy and American CuMo Mining, you can compare the effects of market volatilities on Chesapeake Energy and American CuMo 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 Energy with a short position of American CuMo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chesapeake Energy and American CuMo.
Diversification Opportunities for Chesapeake Energy and American CuMo
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Chesapeake and American is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Energy and American CuMo Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American CuMo Mining and Chesapeake Energy 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 Energy are associated (or correlated) with American CuMo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American CuMo Mining has no effect on the direction of Chesapeake Energy i.e., Chesapeake Energy and American CuMo go up and down completely randomly.
Pair Corralation between Chesapeake Energy and American CuMo
Assuming the 90 days horizon Chesapeake Energy is expected to generate 165.41 times less return on investment than American CuMo. But when comparing it to its historical volatility, Chesapeake Energy is 12.58 times less risky than American CuMo. It trades about 0.01 of its potential returns per unit of risk. American CuMo Mining is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4.00 in American CuMo Mining on August 26, 2024 and sell it today you would lose (3.00) from holding American CuMo Mining or give up 75.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 90.82% |
| Values | Daily Returns |
Chesapeake Energy vs. American CuMo Mining
Performance |
| Timeline |
| Chesapeake Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| American CuMo Mining |
Chesapeake Energy and American CuMo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chesapeake Energy and American CuMo
The main advantage of trading using opposite Chesapeake Energy and American CuMo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chesapeake Energy position performs unexpectedly, American CuMo 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 American CuMo will offset losses from the drop in American CuMo's long position.| Chesapeake Energy vs. Mattel Inc | Chesapeake Energy vs. Eldorado Gold Corp | Chesapeake Energy vs. Academy Sports Outdoors | Chesapeake Energy vs. Flexible Solutions International |
| American CuMo vs. Ascendant Resources | American CuMo vs. Cantex Mine Development | American CuMo vs. Amarc Resources | American CuMo vs. Sterling Metals Corp |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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