Correlation Between EOG Resources and CHK Old

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

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

Diversification Opportunities for EOG Resources and CHK Old

-0.06

Correlation Coefficient

EOG Resources  CHK Old

Good diversification

The 3 months correlation between EOG and CHK is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding EOG Resources and CHK Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHK Old and EOG Resources 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 EOG Resources are associated (or correlated) with CHK Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHK Old has no effect on the direction of EOG Resources i.e., EOG Resources and CHK Old go up and down completely randomly.

Pair Corralation between EOG Resources and CHK Old

Considering the 90-day investment horizon EOG Resources is expected to generate 2.33 times less return on investment than CHK Old. But when comparing it to its historical volatility, EOG Resources is 1.22 times less risky than CHK Old. It trades about 0.07 of its potential returns per unit of risk. CHK Old is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  8,009  in CHK Old on October 24, 2024 and sell it today you would earn a total of  137.00  from holding CHK Old or generate 1.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	8.64%
Values	Daily Returns

EOG Resources  vs.  CHK Old

EOG Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EOG Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, EOG Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CHK Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHK Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical indicators, CHK Old is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with EOG Resources and CHK Old

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

The idea behind EOG Resources and CHK Old 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.