Correlation Between Raytheon Technologies and Chesapeake Utilities

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

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

Diversification Opportunities for Raytheon Technologies and Chesapeake Utilities

0.42

Correlation Coefficient

Raytheon Technologies  Chesapeake Utilities

Very weak diversification

The 3 months correlation between Raytheon and Chesapeake is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies Corp and Chesapeake Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Utilities and Raytheon Technologies 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 Raytheon Technologies Corp 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 Raytheon Technologies i.e., Raytheon Technologies and Chesapeake Utilities go up and down completely randomly.

Pair Corralation between Raytheon Technologies and Chesapeake Utilities

Assuming the 90 days trading horizon Raytheon Technologies Corp is expected to generate 1.1 times more return on investment than Chesapeake Utilities. However, Raytheon Technologies is 1.1 times more volatile than Chesapeake Utilities. It trades about 0.13 of its potential returns per unit of risk. Chesapeake Utilities is currently generating about -0.01 per unit of risk. If you would invest  11,156  in Raytheon Technologies Corp on December 25, 2024 and sell it today you would earn a total of  1,244  from holding Raytheon Technologies Corp or generate 11.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Raytheon Technologies Corp  vs.  Chesapeake Utilities

Raytheon Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Raytheon Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 Raytheon Technologies and Chesapeake Utilities

The main advantage of trading using opposite Raytheon Technologies and Chesapeake Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raytheon Technologies 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 Raytheon Technologies Corp 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.