Correlation Between Chesapeake Utilities and SOFI TECHNOLOGIES

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

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

Diversification Opportunities for Chesapeake Utilities and SOFI TECHNOLOGIES

0.08

Correlation Coefficient

Chesapeake Utilities  SOFI TECHNOLOGIES

Significant diversification

The 3 months correlation between Chesapeake and SOFI is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Utilities and SOFI TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOFI TECHNOLOGIES and Chesapeake Utilities 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 Chesapeake Utilities are associated (or correlated) with SOFI TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOFI TECHNOLOGIES has no effect on the direction of Chesapeake Utilities i.e., Chesapeake Utilities and SOFI TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Chesapeake Utilities and SOFI TECHNOLOGIES

Assuming the 90 days horizon Chesapeake Utilities is expected to generate 0.33 times more return on investment than SOFI TECHNOLOGIES. However, Chesapeake Utilities is 3.05 times less risky than SOFI TECHNOLOGIES. It trades about -0.02 of its potential returns per unit of risk. SOFI TECHNOLOGIES is currently generating about -0.03 per unit of risk. If you would invest  12,238  in Chesapeake Utilities on November 29, 2024 and sell it today you would lose (238.00) from holding Chesapeake Utilities or give up 1.94% of portfolio value over 90 days.

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

Chesapeake Utilities  vs.  SOFI TECHNOLOGIES

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

SOFI TECHNOLOGIES

Risk-Adjusted Performance

Very Weak

Over the last 90 days SOFI TECHNOLOGIES has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Chesapeake Utilities and SOFI TECHNOLOGIES

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

The idea behind Chesapeake Utilities and SOFI TECHNOLOGIES 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.