Correlation Between American Copper and Chesapeake Gold

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

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

Diversification Opportunities for American Copper and Chesapeake Gold

0.3

Correlation Coefficient

American Copper  Chesapeake Gold

Weak diversification

The 3 months correlation between American and Chesapeake is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding American Copper Development and Chesapeake Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Gold Corp and American Copper 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 American Copper Development are associated (or correlated) with Chesapeake Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Gold Corp has no effect on the direction of American Copper i.e., American Copper and Chesapeake Gold go up and down completely randomly.

Pair Corralation between American Copper and Chesapeake Gold

Assuming the 90 days horizon American Copper Development is expected to generate 2.91 times more return on investment than Chesapeake Gold. However, American Copper is 2.91 times more volatile than Chesapeake Gold Corp. It trades about 0.07 of its potential returns per unit of risk. Chesapeake Gold Corp is currently generating about -0.09 per unit of risk. If you would invest  4.00  in American Copper Development on October 26, 2024 and sell it today you would lose (0.42) from holding American Copper Development or give up 10.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

American Copper Development  vs.  Chesapeake Gold Corp

American Copper Deve

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Copper Development are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, American Copper reported solid returns over the last few months and may actually be approaching a breakup point.

Chesapeake Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chesapeake Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with American Copper and Chesapeake Gold

The main advantage of trading using opposite American Copper and Chesapeake Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Copper position performs unexpectedly, Chesapeake Gold 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 Gold will offset losses from the drop in Chesapeake Gold's long position.

The idea behind American Copper Development and Chesapeake Gold Corp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.