Correlation Between Chesapeake Utilities and Spire

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

By analyzing existing cross correlation between Chesapeake Utilities and Spire Inc, you can compare the effects of market volatilities on Chesapeake Utilities and Spire 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 Spire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chesapeake Utilities and Spire.

Diversification Opportunities for Chesapeake Utilities and Spire

0.84

Correlation Coefficient

Chesapeake Utilities  Spire

Very poor diversification

The 3 months correlation between Chesapeake and Spire is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Utilities and Spire Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spire Inc 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 Spire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spire Inc has no effect on the direction of Chesapeake Utilities i.e., Chesapeake Utilities and Spire go up and down completely randomly.

Pair Corralation between Chesapeake Utilities and Spire

Considering the 90-day investment horizon Chesapeake Utilities is expected to generate 1.02 times less return on investment than Spire. But when comparing it to its historical volatility, Chesapeake Utilities is 1.07 times less risky than Spire. It trades about 0.14 of its potential returns per unit of risk. Spire Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  6,523  in Spire Inc on August 30, 2024 and sell it today you would earn a total of  788.00  from holding Spire Inc or generate 12.08% return on investment over 90 days.

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

Chesapeake Utilities  vs.  Spire Inc

Chesapeake Utilities

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Utilities are ranked lower than 11 (%) 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 December 2024.

Spire Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spire Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Spire may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Chesapeake Utilities and Spire

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

The idea behind Chesapeake Utilities and Spire Inc 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 Stocks Directory module to find actively traded stocks across global markets.