Correlation Between Chesapeake Utilities and Merafe Resources

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

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

Diversification Opportunities for Chesapeake Utilities and Merafe Resources

0.0

Correlation Coefficient

Chesapeake Utilities  Merafe Resources

Pay attention - limited upside

The 3 months correlation between Chesapeake and Merafe is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Utilities and Merafe Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merafe Resources 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 Merafe Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merafe Resources has no effect on the direction of Chesapeake Utilities i.e., Chesapeake Utilities and Merafe Resources go up and down completely randomly.

Pair Corralation between Chesapeake Utilities and Merafe Resources

Assuming the 90 days horizon Chesapeake Utilities is expected to under-perform the Merafe Resources. But the stock apears to be less risky and, when comparing its historical volatility, Chesapeake Utilities is 4.76 times less risky than Merafe Resources. The stock trades about -0.27 of its potential returns per unit of risk. The Merafe Resources Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7.50  in Merafe Resources Limited on October 10, 2024 and sell it today you would earn a total of  0.70  from holding Merafe Resources Limited or generate 9.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Chesapeake Utilities  vs.  Merafe Resources Limited

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.

Merafe Resources

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Merafe Resources Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Merafe Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chesapeake Utilities and Merafe Resources

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

The idea behind Chesapeake Utilities and Merafe Resources Limited 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.