Correlation Between Gap, and Chesapeake Energy
Can any of the company-specific risk be diversified away by investing in both Gap, 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 Gap, and Chesapeake Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Gap, and Chesapeake Energy, you can compare the effects of market volatilities on Gap, 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 Gap, with a short position of Chesapeake Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gap, and Chesapeake Energy.
Diversification Opportunities for Gap, and Chesapeake Energy
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Gap, and Chesapeake is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Chesapeake Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Energy and Gap, 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 The Gap, 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 Gap, i.e., Gap, and Chesapeake Energy go up and down completely randomly.
Pair Corralation between Gap, and Chesapeake Energy
Considering the 90-day investment horizon The Gap, is expected to generate 1.63 times more return on investment than Chesapeake Energy. However, Gap, is 1.63 times more volatile than Chesapeake Energy. It trades about 0.07 of its potential returns per unit of risk. Chesapeake Energy is currently generating about -0.01 per unit of risk. If you would invest 1,079 in The Gap, on September 12, 2024 and sell it today you would earn a total of 1,455 from holding The Gap, or generate 134.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.1% |
| Values | Daily Returns |
The Gap, vs. Chesapeake Energy
Performance |
| Timeline |
| Gap, |
| Chesapeake Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Strong
Gap, and Chesapeake Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gap, and Chesapeake Energy
The main advantage of trading using opposite Gap, and Chesapeake Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, 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.The idea behind The Gap, and Chesapeake Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Chesapeake Energy vs. Steven Madden | Chesapeake Energy vs. The Joint Corp | Chesapeake Energy vs. Under Armour C | Chesapeake Energy vs. Xtant Medical Holdings |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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