Correlation Between Empire State and Chesapeake Energy
Can any of the company-specific risk be diversified away by investing in both Empire State and Chesapeake 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 Empire State and Chesapeake Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Empire State Realty and Chesapeake Energy, you can compare the effects of market volatilities on Empire State and Chesapeake 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 Empire State with a short position of Chesapeake Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and Chesapeake Energy.
Diversification Opportunities for Empire State and Chesapeake Energy
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Empire and Chesapeake is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Chesapeake Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Energy and Empire State 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 Empire State Realty are associated (or correlated) with Chesapeake Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Energy has no effect on the direction of Empire State i.e., Empire State and Chesapeake Energy go up and down completely randomly.
Pair Corralation between Empire State and Chesapeake Energy
Given the investment horizon of 90 days Empire State Realty is expected to generate 0.55 times more return on investment than Chesapeake Energy. However, Empire State Realty is 1.83 times less risky than Chesapeake Energy. It trades about 0.09 of its potential returns per unit of risk. Chesapeake Energy is currently generating about -0.08 per unit of risk. If you would invest 945.00 in Empire State Realty on September 1, 2024 and sell it today you would earn a total of 151.00 from holding Empire State Realty or generate 15.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 67.46% |
| Values | Daily Returns |
Empire State Realty vs. Chesapeake Energy
Performance |
| Timeline |
| Empire State Realty |
| Chesapeake Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
Empire State and Chesapeake Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire State and Chesapeake Energy
The main advantage of trading using opposite Empire State and Chesapeake Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, Chesapeake 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 Chesapeake Energy will offset losses from the drop in Chesapeake Energy's long position.| Empire State vs. Paramount Group | Empire State vs. Hudson Pacific Properties | Empire State vs. Equity Commonwealth | Empire State vs. Douglas Emmett |
| Chesapeake Energy vs. NGL Energy Partners | Chesapeake Energy vs. Global Partners LP | Chesapeake Energy vs. Crescent Energy Co |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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