Correlation Between PARAGON GROUP and Chesapeake Utilities

Can any of the company-specific risk be diversified away by investing in both PARAGON GROUP 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 PARAGON GROUP and Chesapeake Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PARAGON GROUP and Chesapeake Utilities, you can compare the effects of market volatilities on PARAGON GROUP 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 PARAGON GROUP with a short position of Chesapeake Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of PARAGON GROUP and Chesapeake Utilities.

Diversification Opportunities for PARAGON GROUP and Chesapeake Utilities

0.46

Correlation Coefficient

PARAGON GROUP  Chesapeake Utilities

Very weak diversification

The 3 months correlation between PARAGON and Chesapeake is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding PARAGON GROUP and Chesapeake Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Utilities and PARAGON GROUP 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 PARAGON GROUP 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 PARAGON GROUP i.e., PARAGON GROUP and Chesapeake Utilities go up and down completely randomly.

Pair Corralation between PARAGON GROUP and Chesapeake Utilities

Assuming the 90 days trading horizon PARAGON GROUP is expected to generate 1.32 times more return on investment than Chesapeake Utilities. However, PARAGON GROUP is 1.32 times more volatile than Chesapeake Utilities. It trades about 0.05 of its potential returns per unit of risk. Chesapeake Utilities is currently generating about -0.01 per unit of risk. If you would invest  864.00  in PARAGON GROUP on December 24, 2024 and sell it today you would earn a total of  41.00  from holding PARAGON GROUP or generate 4.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

PARAGON GROUP  vs.  Chesapeake Utilities

PARAGON GROUP

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PARAGON GROUP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, PARAGON GROUP is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Chesapeake Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chesapeake Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Chesapeake Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PARAGON GROUP and Chesapeake Utilities

The main advantage of trading using opposite PARAGON GROUP and Chesapeake Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PARAGON GROUP 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 PARAGON GROUP 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..