Correlation Between SIERRA METALS and Chesapeake Utilities

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

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

Diversification Opportunities for SIERRA METALS and Chesapeake Utilities

-0.74

Correlation Coefficient

SIERRA METALS  Chesapeake Utilities

Pay attention - limited upside

The 3 months correlation between SIERRA and Chesapeake is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding SIERRA METALS and Chesapeake Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Utilities and SIERRA METALS 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 SIERRA METALS are associated (or correlated) with Chesapeake Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Utilities has no effect on the direction of SIERRA METALS i.e., SIERRA METALS and Chesapeake Utilities go up and down completely randomly.

Pair Corralation between SIERRA METALS and Chesapeake Utilities

Assuming the 90 days trading horizon SIERRA METALS is expected to generate 2.6 times more return on investment than Chesapeake Utilities. However, SIERRA METALS is 2.6 times more volatile than Chesapeake Utilities. It trades about 0.48 of its potential returns per unit of risk. Chesapeake Utilities is currently generating about -0.36 per unit of risk. If you would invest  45.00  in SIERRA METALS on October 5, 2024 and sell it today you would earn a total of  11.00  from holding SIERRA METALS or generate 24.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

SIERRA METALS  vs.  Chesapeake Utilities

SIERRA METALS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SIERRA METALS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, SIERRA METALS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Chesapeake Utilities

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Chesapeake Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Chesapeake Utilities may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SIERRA METALS and Chesapeake Utilities

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

The idea behind SIERRA METALS and Chesapeake Utilities 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.