Correlation Between Chesapeake Energy and NGL Energy
Can any of the company-specific risk be diversified away by investing in both Chesapeake Energy and NGL Energy 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 NGL Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chesapeake Energy and NGL Energy Partners, you can compare the effects of market volatilities on Chesapeake Energy and NGL Energy 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 NGL Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chesapeake Energy and NGL Energy.
Diversification Opportunities for Chesapeake Energy and NGL Energy
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Chesapeake and NGL is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Energy and NGL Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGL Energy Partners 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 NGL Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGL Energy Partners has no effect on the direction of Chesapeake Energy i.e., Chesapeake Energy and NGL Energy go up and down completely randomly.
Pair Corralation between Chesapeake Energy and NGL Energy
Assuming the 90 days horizon Chesapeake Energy is expected to under-perform the NGL Energy. In addition to that, Chesapeake Energy is 1.06 times more volatile than NGL Energy Partners. It trades about -0.01 of its total potential returns per unit of risk. NGL Energy Partners is currently generating about 0.14 per unit of volatility. If you would invest 656.00 in NGL Energy Partners on August 30, 2024 and sell it today you would earn a total of 1,718 from holding NGL Energy Partners or generate 261.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.92% |
| Values | Daily Returns |
Chesapeake Energy vs. NGL Energy Partners
Performance |
| Timeline |
| Chesapeake Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| NGL Energy Partners |
Chesapeake Energy and NGL Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chesapeake Energy and NGL Energy
The main advantage of trading using opposite Chesapeake Energy and NGL Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chesapeake Energy position performs unexpectedly, NGL Energy 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 NGL Energy will offset losses from the drop in NGL Energy's long position.| Chesapeake Energy vs. Lindblad Expeditions Holdings | Chesapeake Energy vs. KVH Industries | Chesapeake Energy vs. Skillful Craftsman Education | Chesapeake Energy vs. Old Dominion Freight |
| NGL Energy vs. NGL Energy Partners | NGL Energy vs. Dynagas LNG Partners | NGL Energy vs. GasLog Partners LP | NGL Energy vs. GasLog Partners LP |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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