Correlation Between Corporate Office and Chesapeake Utilities

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

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

Diversification Opportunities for Corporate Office and Chesapeake Utilities

0.47

Correlation Coefficient

Corporate Office  Chesapeake Utilities

Very weak diversification

The 3 months correlation between Corporate and Chesapeake is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Office Properties and Chesapeake Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Utilities and Corporate Office 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 Corporate Office Properties 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 Corporate Office i.e., Corporate Office and Chesapeake Utilities go up and down completely randomly.

Pair Corralation between Corporate Office and Chesapeake Utilities

Assuming the 90 days horizon Corporate Office Properties is expected to under-perform the Chesapeake Utilities. But the stock apears to be less risky and, when comparing its historical volatility, Corporate Office Properties is 1.12 times less risky than Chesapeake Utilities. The stock trades about -0.02 of its potential returns per unit of risk. The Chesapeake Utilities is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  11,144  in Chesapeake Utilities on October 23, 2024 and sell it today you would earn a total of  856.00  from holding Chesapeake Utilities or generate 7.68% return on investment over 90 days.

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

Corporate Office Properties  vs.  Chesapeake Utilities

Corporate Office Pro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Corporate Office Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Corporate Office is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Chesapeake Utilities

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Utilities are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. 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 Corporate Office and Chesapeake Utilities

The main advantage of trading using opposite Corporate Office and Chesapeake Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corporate Office 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 Corporate Office Properties 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.