Correlation Between Chesapeake Energy and Amerigo Resources

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

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

Diversification Opportunities for Chesapeake Energy and Amerigo Resources

-0.35

Correlation Coefficient

Chesapeake Energy  Amerigo Resources

Very good diversification

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

Pair Corralation between Chesapeake Energy and Amerigo Resources

Assuming the 90 days horizon Chesapeake Energy is expected to under-perform the Amerigo Resources. But the stock apears to be less risky and, when comparing its historical volatility, Chesapeake Energy is 1.13 times less risky than Amerigo Resources. The stock trades about -0.02 of its potential returns per unit of risk. The Amerigo Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  82.00  in Amerigo Resources on September 4, 2024 and sell it today you would earn a total of  39.00  from holding Amerigo Resources or generate 47.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.31%
Values	Daily Returns

Chesapeake Energy  vs.  Amerigo Resources

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.

Amerigo Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Amerigo Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Amerigo Resources 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 Energy and Amerigo Resources

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

The idea behind Chesapeake Energy and Amerigo Resources 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.