Correlation Between Chesapeake Gold and Usha Resources

Can any of the company-specific risk be diversified away by investing in both Chesapeake Gold and Usha 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 Gold and Usha Resources 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 Usha Resources, you can compare the effects of market volatilities on Chesapeake Gold and Usha 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 Gold with a short position of Usha Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chesapeake Gold and Usha Resources.

Diversification Opportunities for Chesapeake Gold and Usha Resources

-0.47

Correlation Coefficient

Chesapeake Gold  Usha Resources

Very good diversification

The 3 months correlation between Chesapeake and Usha is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Gold Corp and Usha Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Usha Resources 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 Usha Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Usha Resources has no effect on the direction of Chesapeake Gold i.e., Chesapeake Gold and Usha Resources go up and down completely randomly.

Pair Corralation between Chesapeake Gold and Usha Resources

Assuming the 90 days horizon Chesapeake Gold Corp is expected to generate 0.4 times more return on investment than Usha Resources. However, Chesapeake Gold Corp is 2.48 times less risky than Usha Resources. It trades about 0.17 of its potential returns per unit of risk. Usha Resources is currently generating about 0.06 per unit of risk. If you would invest  59.00  in Chesapeake Gold Corp on December 21, 2024 and sell it today you would earn a total of  33.00  from holding Chesapeake Gold Corp or generate 55.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Chesapeake Gold Corp  vs.  Usha Resources

Chesapeake Gold Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Gold Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Chesapeake Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Usha Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Usha Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Usha Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chesapeake Gold and Usha Resources

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

The idea behind Chesapeake Gold Corp and Usha 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.