Correlation Between Chesapeake Granite and Baird Smallcap

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

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

Diversification Opportunities for Chesapeake Granite and Baird Smallcap

0.61

Correlation Coefficient

Chesapeake Granite  Baird Smallcap

Poor diversification

The 3 months correlation between Chesapeake and Baird is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Granite Wash and Baird Smallcap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Smallcap Value and Chesapeake Granite 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 Granite Wash are associated (or correlated) with Baird Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Smallcap Value has no effect on the direction of Chesapeake Granite i.e., Chesapeake Granite and Baird Smallcap go up and down completely randomly.

Pair Corralation between Chesapeake Granite and Baird Smallcap

Given the investment horizon of 90 days Chesapeake Granite Wash is expected to generate 1.24 times more return on investment than Baird Smallcap. However, Chesapeake Granite is 1.24 times more volatile than Baird Smallcap Value. It trades about 0.06 of its potential returns per unit of risk. Baird Smallcap Value is currently generating about 0.05 per unit of risk. If you would invest  106.00  in Chesapeake Granite Wash on October 21, 2024 and sell it today you would earn a total of  12.00  from holding Chesapeake Granite Wash or generate 11.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	24.6%
Values	Daily Returns

Chesapeake Granite Wash  vs.  Baird Smallcap Value

Chesapeake Granite Wash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chesapeake Granite Wash has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Chesapeake Granite is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Baird Smallcap Value

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baird Smallcap Value are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Baird Smallcap showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chesapeake Granite and Baird Smallcap

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

The idea behind Chesapeake Granite Wash and Baird Smallcap Value 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 Transaction History module to view history of all your transactions and understand their impact on performance.