Correlation Between Chesapeake Utilities and Bank Of

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

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

Diversification Opportunities for Chesapeake Utilities and Bank Of

0.87

Correlation Coefficient

Chesapeake Utilities  Bank Of

Very poor diversification

The 3 months correlation between Chesapeake and Bank is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Utilities and The Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Bank 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 Bank Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Bank has no effect on the direction of Chesapeake Utilities i.e., Chesapeake Utilities and Bank Of go up and down completely randomly.

Pair Corralation between Chesapeake Utilities and Bank Of

Assuming the 90 days horizon Chesapeake Utilities is expected to generate 4.85 times less return on investment than Bank Of. In addition to that, Chesapeake Utilities is 1.01 times more volatile than The Bank of. It trades about 0.02 of its total potential returns per unit of risk. The Bank of is currently generating about 0.09 per unit of volatility. If you would invest  3,960  in The Bank of on September 20, 2024 and sell it today you would earn a total of  3,430  from holding The Bank of or generate 86.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Chesapeake Utilities  vs.  The Bank of

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 fragile basic indicators, Chesapeake Utilities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

The Bank

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Bank of are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bank Of reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chesapeake Utilities and Bank Of

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

The idea behind Chesapeake Utilities and The Bank of 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.