Correlation Between Chesapeake Utilities and FORWARD AIR

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

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

Diversification Opportunities for Chesapeake Utilities and FORWARD AIR

0.01

Correlation Coefficient

Chesapeake Utilities  FORWARD AIR

Significant diversification

The 3 months correlation between Chesapeake and FORWARD is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Utilities and FORWARD AIR P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FORWARD AIR P 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 FORWARD AIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FORWARD AIR P has no effect on the direction of Chesapeake Utilities i.e., Chesapeake Utilities and FORWARD AIR go up and down completely randomly.

Pair Corralation between Chesapeake Utilities and FORWARD AIR

Assuming the 90 days horizon Chesapeake Utilities is expected to generate 0.3 times more return on investment than FORWARD AIR. However, Chesapeake Utilities is 3.33 times less risky than FORWARD AIR. It trades about -0.17 of its potential returns per unit of risk. FORWARD AIR P is currently generating about -0.06 per unit of risk. If you would invest  11,940  in Chesapeake Utilities on October 8, 2024 and sell it today you would lose (340.00) from holding Chesapeake Utilities or give up 2.85% 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.  FORWARD AIR P

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 February 2025.

FORWARD AIR P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FORWARD AIR P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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 FORWARD AIR

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

The idea behind Chesapeake Utilities and FORWARD AIR P 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.