Correlation Between Chesapeake Utilities and BB Biotech

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

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

Diversification Opportunities for Chesapeake Utilities and BB Biotech

0.31

Correlation Coefficient

Chesapeake Utilities  BB Biotech

Weak diversification

The 3 months correlation between Chesapeake and BBZA is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Utilities and BB Biotech AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BB Biotech AG 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 BB Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BB Biotech AG has no effect on the direction of Chesapeake Utilities i.e., Chesapeake Utilities and BB Biotech go up and down completely randomly.

Pair Corralation between Chesapeake Utilities and BB Biotech

Assuming the 90 days horizon Chesapeake Utilities is expected to generate 0.91 times more return on investment than BB Biotech. However, Chesapeake Utilities is 1.1 times less risky than BB Biotech. It trades about 0.13 of its potential returns per unit of risk. BB Biotech AG is currently generating about 0.02 per unit of risk. If you would invest  10,837  in Chesapeake Utilities on September 12, 2024 and sell it today you would earn a total of  1,263  from holding Chesapeake Utilities or generate 11.65% return on investment over 90 days.

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

Chesapeake Utilities  vs.  BB Biotech AG

Chesapeake Utilities

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Utilities are ranked lower than 9 (%) 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.

BB Biotech AG

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BB Biotech AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BB Biotech is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Chesapeake Utilities and BB Biotech

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

The idea behind Chesapeake Utilities and BB Biotech AG 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.