Correlation Between Chesapeake Utilities and SPORTING

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

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

Diversification Opportunities for Chesapeake Utilities and SPORTING

0.21

Correlation Coefficient

Chesapeake Utilities  SPORTING

Modest diversification

The 3 months correlation between Chesapeake and SPORTING is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Utilities and SPORTING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPORTING 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 SPORTING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPORTING has no effect on the direction of Chesapeake Utilities i.e., Chesapeake Utilities and SPORTING go up and down completely randomly.

Pair Corralation between Chesapeake Utilities and SPORTING

Assuming the 90 days horizon Chesapeake Utilities is expected to generate 1.21 times more return on investment than SPORTING. However, Chesapeake Utilities is 1.21 times more volatile than SPORTING. It trades about -0.04 of its potential returns per unit of risk. SPORTING is currently generating about -0.18 per unit of risk. If you would invest  12,036  in Chesapeake Utilities on September 19, 2024 and sell it today you would lose (136.00) from holding Chesapeake Utilities or give up 1.13% of portfolio value over 90 days.

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

Chesapeake Utilities  vs.  SPORTING

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 uncertain basic indicators, Chesapeake Utilities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SPORTING

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPORTING are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, SPORTING is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Chesapeake Utilities and SPORTING

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

The idea behind Chesapeake Utilities and SPORTING 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.