Correlation Between Chesapeake Energy and AppHarvest

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

By analyzing existing cross correlation between Chesapeake Energy and AppHarvest, you can compare the effects of market volatilities on Chesapeake Energy and AppHarvest 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 Energy with a short position of AppHarvest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chesapeake Energy and AppHarvest.

Diversification Opportunities for Chesapeake Energy and AppHarvest

0.64

Correlation Coefficient

Chesapeake Energy  AppHarvest

Poor diversification

The 3 months correlation between Chesapeake and AppHarvest is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Energy and AppHarvest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AppHarvest and Chesapeake Energy 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 Energy are associated (or correlated) with AppHarvest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AppHarvest has no effect on the direction of Chesapeake Energy i.e., Chesapeake Energy and AppHarvest go up and down completely randomly.

Pair Corralation between Chesapeake Energy and AppHarvest

If you would invest  5,448  in Chesapeake Energy on September 1, 2024 and sell it today you would earn a total of  802.00  from holding Chesapeake Energy or generate 14.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.55%
Values	Daily Returns

Chesapeake Energy  vs.  AppHarvest

Chesapeake Energy

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Chesapeake Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite weak technical and fundamental indicators, Chesapeake Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

AppHarvest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AppHarvest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical indicators, AppHarvest is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Chesapeake Energy and AppHarvest

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

The idea behind Chesapeake Energy and AppHarvest 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.