Correlation Between Vital Energy and Chesapeake Energy

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

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

Diversification Opportunities for Vital Energy and Chesapeake Energy

-0.23

Correlation Coefficient

Vital Energy  Chesapeake Energy

Very good diversification

The 3 months correlation between Vital and Chesapeake is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Vital Energy and Chesapeake Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Energy and Vital Energy 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 Vital Energy are associated (or correlated) with Chesapeake Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Energy has no effect on the direction of Vital Energy i.e., Vital Energy and Chesapeake Energy go up and down completely randomly.

Pair Corralation between Vital Energy and Chesapeake Energy

If you would invest  8,146  in Chesapeake Energy on September 25, 2024 and sell it today you would earn a total of  0.00  from holding Chesapeake Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.0%
Values	Daily Returns

Vital Energy  vs.  Chesapeake Energy

Vital Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vital Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Vital Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Chesapeake Energy

Risk-Adjusted Performance

0 of 100

Very Strong

Over the last 90 days Chesapeake Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite unsteady technical indicators, Chesapeake Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vital Energy and Chesapeake Energy

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

The idea behind Vital Energy and Chesapeake Energy 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.