Correlation Between Chesapeake Gold and New Pacific

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

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

Diversification Opportunities for Chesapeake Gold and New Pacific

0.67

Correlation Coefficient

Chesapeake Gold  New Pacific

Poor diversification

The 3 months correlation between Chesapeake and New is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Gold Corp and New Pacific Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Pacific Metals and Chesapeake Gold 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 Gold Corp are associated (or correlated) with New Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Pacific Metals has no effect on the direction of Chesapeake Gold i.e., Chesapeake Gold and New Pacific go up and down completely randomly.

Pair Corralation between Chesapeake Gold and New Pacific

Assuming the 90 days horizon Chesapeake Gold Corp is expected to generate 2.3 times more return on investment than New Pacific. However, Chesapeake Gold is 2.3 times more volatile than New Pacific Metals. It trades about 0.45 of its potential returns per unit of risk. New Pacific Metals is currently generating about 0.0 per unit of risk. If you would invest  59.00  in Chesapeake Gold Corp on October 23, 2024 and sell it today you would earn a total of  37.00  from holding Chesapeake Gold Corp or generate 62.71% return on investment over 90 days.

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

Chesapeake Gold Corp  vs.  New Pacific Metals

Chesapeake Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chesapeake Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

New Pacific Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Pacific Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Chesapeake Gold and New Pacific

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

The idea behind Chesapeake Gold Corp and New Pacific Metals 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.