Correlation Between Chesapeake Utilities and MHP Hotel

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

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

Diversification Opportunities for Chesapeake Utilities and MHP Hotel

0.43

Correlation Coefficient

Chesapeake Utilities  MHP Hotel

Very weak diversification

The 3 months correlation between Chesapeake and MHP is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Utilities and MHP Hotel AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MHP Hotel 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 MHP Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MHP Hotel AG has no effect on the direction of Chesapeake Utilities i.e., Chesapeake Utilities and MHP Hotel go up and down completely randomly.

Pair Corralation between Chesapeake Utilities and MHP Hotel

Assuming the 90 days horizon Chesapeake Utilities is expected to under-perform the MHP Hotel. But the stock apears to be less risky and, when comparing its historical volatility, Chesapeake Utilities is 2.17 times less risky than MHP Hotel. The stock trades about -0.01 of its potential returns per unit of risk. The MHP Hotel AG is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  119.00  in MHP Hotel AG on December 24, 2024 and sell it today you would earn a total of  19.00  from holding MHP Hotel AG or generate 15.97% return on investment over 90 days.

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

Chesapeake Utilities  vs.  MHP Hotel AG

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

MHP Hotel AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MHP Hotel AG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, MHP Hotel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chesapeake Utilities and MHP Hotel

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

The idea behind Chesapeake Utilities and MHP Hotel 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.