Correlation Between Aptiv PLC and Chesapeake Energy

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

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

Diversification Opportunities for Aptiv PLC and Chesapeake Energy

0.74

Correlation Coefficient

Aptiv PLC  Chesapeake Energy

Poor diversification

The 3 months correlation between Aptiv and Chesapeake is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC and Chesapeake Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Energy and Aptiv PLC 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 Aptiv PLC are associated (or correlated) with Chesapeake Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Energy has no effect on the direction of Aptiv PLC i.e., Aptiv PLC and Chesapeake Energy go up and down completely randomly.

Pair Corralation between Aptiv PLC and Chesapeake Energy

If you would invest  6,404  in Chesapeake Energy on October 3, 2024 and sell it today you would earn a total of  0.00  from holding Chesapeake Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.61%
Values	Daily Returns

Aptiv PLC  vs.  Chesapeake Energy

Aptiv PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aptiv PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Chesapeake Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chesapeake Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Chesapeake Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aptiv PLC and Chesapeake Energy

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

The idea behind Aptiv PLC and Chesapeake Energy 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.