Correlation Between Chesapeake Utilities and JAPAN AIRLINES

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

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

Diversification Opportunities for Chesapeake Utilities and JAPAN AIRLINES

0.35

Correlation Coefficient

Chesapeake Utilities  JAPAN AIRLINES

Weak diversification

The 3 months correlation between Chesapeake and JAPAN is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Utilities and JAPAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN AIRLINES 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 JAPAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN AIRLINES has no effect on the direction of Chesapeake Utilities i.e., Chesapeake Utilities and JAPAN AIRLINES go up and down completely randomly.

Pair Corralation between Chesapeake Utilities and JAPAN AIRLINES

Assuming the 90 days horizon Chesapeake Utilities is expected to generate 1.18 times more return on investment than JAPAN AIRLINES. However, Chesapeake Utilities is 1.18 times more volatile than JAPAN AIRLINES. It trades about 0.05 of its potential returns per unit of risk. JAPAN AIRLINES is currently generating about -0.01 per unit of risk. If you would invest  10,945  in Chesapeake Utilities on September 27, 2024 and sell it today you would earn a total of  455.00  from holding Chesapeake Utilities or generate 4.16% 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.  JAPAN AIRLINES

Chesapeake Utilities

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Utilities are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

JAPAN AIRLINES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JAPAN AIRLINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, JAPAN AIRLINES is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Chesapeake Utilities and JAPAN AIRLINES

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

The idea behind Chesapeake Utilities and JAPAN AIRLINES 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.