Correlation Between Chesapeake Utilities and Grupo Aval

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

By analyzing existing cross correlation between Chesapeake Utilities and Grupo Aval Acciones, you can compare the effects of market volatilities on Chesapeake Utilities and Grupo Aval 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 Grupo Aval. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chesapeake Utilities and Grupo Aval.

Diversification Opportunities for Chesapeake Utilities and Grupo Aval

0.86

Correlation Coefficient

Chesapeake Utilities  Grupo Aval

Very poor diversification

The 3 months correlation between Chesapeake and Grupo is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Utilities and Grupo Aval Acciones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Aval Acciones 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 Grupo Aval. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Aval Acciones has no effect on the direction of Chesapeake Utilities i.e., Chesapeake Utilities and Grupo Aval go up and down completely randomly.

Pair Corralation between Chesapeake Utilities and Grupo Aval

Assuming the 90 days horizon Chesapeake Utilities is expected to under-perform the Grupo Aval. But the stock apears to be less risky and, when comparing its historical volatility, Chesapeake Utilities is 1.22 times less risky than Grupo Aval. The stock trades about -0.04 of its potential returns per unit of risk. The Grupo Aval Acciones is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  195.00  in Grupo Aval Acciones on September 19, 2024 and sell it today you would earn a total of  5.00  from holding Grupo Aval Acciones or generate 2.56% return on investment over 90 days.

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

Chesapeake Utilities  vs.  Grupo Aval Acciones

Chesapeake Utilities

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Utilities are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Chesapeake Utilities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Grupo Aval Acciones

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aval Acciones are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Grupo Aval may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Chesapeake Utilities and Grupo Aval

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

The idea behind Chesapeake Utilities and Grupo Aval Acciones 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.