Correlation Between Chesapeake Utilities and NorthWestern
Can any of the company-specific risk be diversified away by investing in both Chesapeake Utilities and NorthWestern 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 NorthWestern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chesapeake Utilities and NorthWestern, you can compare the effects of market volatilities on Chesapeake Utilities and NorthWestern 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 NorthWestern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chesapeake Utilities and NorthWestern.
Diversification Opportunities for Chesapeake Utilities and NorthWestern
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chesapeake and NorthWestern is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Utilities and NorthWestern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorthWestern 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 NorthWestern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorthWestern has no effect on the direction of Chesapeake Utilities i.e., Chesapeake Utilities and NorthWestern go up and down completely randomly.
Pair Corralation between Chesapeake Utilities and NorthWestern
Considering the 90-day investment horizon Chesapeake Utilities is expected to generate 1.18 times more return on investment than NorthWestern. However, Chesapeake Utilities is 1.18 times more volatile than NorthWestern. It trades about 0.02 of its potential returns per unit of risk. NorthWestern is currently generating about 0.01 per unit of risk. If you would invest 12,372 in Chesapeake Utilities on August 27, 2024 and sell it today you would earn a total of 860.00 from holding Chesapeake Utilities or generate 6.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chesapeake Utilities vs. NorthWestern
Performance |
| Timeline |
| Chesapeake Utilities |
| NorthWestern |
Chesapeake Utilities and NorthWestern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chesapeake Utilities and NorthWestern
The main advantage of trading using opposite Chesapeake Utilities and NorthWestern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chesapeake Utilities position performs unexpectedly, NorthWestern 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 NorthWestern will offset losses from the drop in NorthWestern's long position.| Chesapeake Utilities vs. Northwest Natural Gas | Chesapeake Utilities vs. One Gas | Chesapeake Utilities vs. NewJersey Resources | Chesapeake Utilities vs. Spire Inc |
| NorthWestern vs. Allete Inc | NorthWestern vs. Black Hills | NorthWestern vs. Otter Tail | NorthWestern vs. Avista |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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