Correlation Between Chesapeake Utilities and Northwest Natural

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

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

Diversification Opportunities for Chesapeake Utilities and Northwest Natural

0.93

Correlation Coefficient

Chesapeake Utilities  Northwest Natural

Almost no diversification

The 3 months correlation between Chesapeake and Northwest is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Utilities and Northwest Natural Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Natural Gas and Chesapeake Utilities 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 Utilities are associated (or correlated) with Northwest Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northwest Natural Gas has no effect on the direction of Chesapeake Utilities i.e., Chesapeake Utilities and Northwest Natural go up and down completely randomly.

Pair Corralation between Chesapeake Utilities and Northwest Natural

Considering the 90-day investment horizon Chesapeake Utilities is expected to generate 1.39 times less return on investment than Northwest Natural. In addition to that, Chesapeake Utilities is 1.01 times more volatile than Northwest Natural Gas. It trades about 0.09 of its total potential returns per unit of risk. Northwest Natural Gas is currently generating about 0.12 per unit of volatility. If you would invest  3,889  in Northwest Natural Gas on December 30, 2024 and sell it today you would earn a total of  374.00  from holding Northwest Natural Gas or generate 9.62% return on investment over 90 days.

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

Chesapeake Utilities  vs.  Northwest Natural Gas

Chesapeake Utilities

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Utilities are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Chesapeake Utilities may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Northwest Natural Gas

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northwest Natural Gas are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Northwest Natural may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Chesapeake Utilities and Northwest Natural

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

The idea behind Chesapeake Utilities and Northwest Natural Gas 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.

Check out your portfolio center.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.