Correlation Between ENN Energy and Chesapeake Utilities
Can any of the company-specific risk be diversified away by investing in both ENN Energy 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 ENN Energy and Chesapeake Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ENN Energy Holdings and Chesapeake Utilities, you can compare the effects of market volatilities on ENN Energy 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 ENN Energy with a short position of Chesapeake Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENN Energy and Chesapeake Utilities.
Diversification Opportunities for ENN Energy and Chesapeake Utilities
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ENN and Chesapeake is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ENN Energy Holdings and Chesapeake Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Utilities and ENN 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 ENN Energy Holdings 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 ENN Energy i.e., ENN Energy and Chesapeake Utilities go up and down completely randomly.
Pair Corralation between ENN Energy and Chesapeake Utilities
Assuming the 90 days trading horizon ENN Energy Holdings is expected to generate 2.4 times more return on investment than Chesapeake Utilities. However, ENN Energy is 2.4 times more volatile than Chesapeake Utilities. It trades about 0.02 of its potential returns per unit of risk. Chesapeake Utilities is currently generating about 0.02 per unit of risk. If you would invest 631.00 in ENN Energy Holdings on September 2, 2024 and sell it today you would lose (6.00) from holding ENN Energy Holdings or give up 0.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ENN Energy Holdings vs. Chesapeake Utilities
Performance |
| Timeline |
| ENN Energy Holdings |
| Chesapeake Utilities |
ENN Energy and Chesapeake Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ENN Energy and Chesapeake Utilities
The main advantage of trading using opposite ENN Energy and Chesapeake Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ENN Energy 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.| ENN Energy vs. CenterPoint Energy | ENN Energy vs. Snam SpA | ENN Energy vs. Superior Plus Corp | ENN Energy vs. NMI Holdings |
| Chesapeake Utilities vs. CenterPoint Energy | Chesapeake Utilities vs. Snam SpA | Chesapeake Utilities vs. Superior Plus Corp | Chesapeake Utilities vs. NMI 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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