Correlation Between Chesapeake Utilities and STRA Hannoversche

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

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

Diversification Opportunities for Chesapeake Utilities and STRA Hannoversche

-0.72

Correlation Coefficient

Chesapeake Utilities  STRA Hannoversche

Pay attention - limited upside

The 3 months correlation between Chesapeake and STRA is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Utilities and STRA Hannoversche Verkehrsbetr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRA Hannoversche 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 STRA Hannoversche. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRA Hannoversche has no effect on the direction of Chesapeake Utilities i.e., Chesapeake Utilities and STRA Hannoversche go up and down completely randomly.

Pair Corralation between Chesapeake Utilities and STRA Hannoversche

Assuming the 90 days horizon Chesapeake Utilities is expected to generate 1.14 times less return on investment than STRA Hannoversche. But when comparing it to its historical volatility, Chesapeake Utilities is 2.53 times less risky than STRA Hannoversche. It trades about 0.02 of its potential returns per unit of risk. STRA Hannoversche Verkehrsbetriebe is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,171  in STRA Hannoversche Verkehrsbetriebe on October 10, 2024 and sell it today you would lose (201.00) from holding STRA Hannoversche Verkehrsbetriebe or give up 17.16% of portfolio value over 90 days.

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

Chesapeake Utilities  vs.  STRA Hannoversche Verkehrsbetr

Chesapeake Utilities

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Utilities are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Chesapeake Utilities may actually be approaching a critical reversion point that can send shares even higher in February 2025.

STRA Hannoversche

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STRA Hannoversche Verkehrsbetriebe has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, STRA Hannoversche is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Chesapeake Utilities and STRA Hannoversche

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

The idea behind Chesapeake Utilities and STRA Hannoversche Verkehrsbetriebe 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.