Correlation Between UGI and Chesapeake Utilities
Can any of the company-specific risk be diversified away by investing in both UGI and Chesapeake Utilities 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 UGI and Chesapeake Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UGI Corporation and Chesapeake Utilities, you can compare the effects of market volatilities on UGI and Chesapeake Utilities 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 UGI with a short position of Chesapeake Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of UGI and Chesapeake Utilities.
Diversification Opportunities for UGI and Chesapeake Utilities
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between UGI and Chesapeake is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding UGI Corp. and Chesapeake Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Utilities and UGI 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 UGI Corporation are associated (or correlated) with Chesapeake Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Utilities has no effect on the direction of UGI i.e., UGI and Chesapeake Utilities go up and down completely randomly.
Pair Corralation between UGI and Chesapeake Utilities
Considering the 90-day investment horizon UGI Corporation is expected to generate 0.99 times more return on investment than Chesapeake Utilities. However, UGI Corporation is 1.01 times less risky than Chesapeake Utilities. It trades about 0.4 of its potential returns per unit of risk. Chesapeake Utilities is currently generating about 0.18 per unit of risk. If you would invest 2,849 in UGI Corporation on November 9, 2024 and sell it today you would earn a total of 352.00 from holding UGI Corporation or generate 12.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
UGI Corp. vs. Chesapeake Utilities
Performance |
| Timeline |
| UGI Corporation |
| Chesapeake Utilities |
UGI and Chesapeake Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UGI and Chesapeake Utilities
The main advantage of trading using opposite UGI and Chesapeake Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UGI position performs unexpectedly, Chesapeake Utilities 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 Utilities will offset losses from the drop in Chesapeake Utilities' long position.The idea behind UGI Corporation and Chesapeake Utilities 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 Utilities vs. Northwest Natural Gas | Chesapeake Utilities vs. One Gas | Chesapeake Utilities vs. NewJersey Resources | Chesapeake Utilities vs. Spire Inc |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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