Correlation Between X FAB and Chesapeake Utilities

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

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

Diversification Opportunities for X FAB and Chesapeake Utilities

0.03

Correlation Coefficient

X FAB  Chesapeake Utilities

Significant diversification

The 3 months correlation between XFB and Chesapeake is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Chesapeake Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Utilities and X FAB 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 X FAB Silicon Foundries 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 X FAB i.e., X FAB and Chesapeake Utilities go up and down completely randomly.

Pair Corralation between X FAB and Chesapeake Utilities

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the Chesapeake Utilities. In addition to that, X FAB is 1.97 times more volatile than Chesapeake Utilities. It trades about -0.12 of its total potential returns per unit of risk. Chesapeake Utilities is currently generating about 0.01 per unit of volatility. If you would invest  11,441  in Chesapeake Utilities on December 27, 2024 and sell it today you would earn a total of  59.00  from holding Chesapeake Utilities or generate 0.52% return on investment over 90 days.

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

X FAB Silicon Foundries  vs.  Chesapeake Utilities

X FAB Silicon

Risk-Adjusted Performance

Very Weak

Over the last 90 days X FAB Silicon Foundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Chesapeake Utilities

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Utilities are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Chesapeake Utilities is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with X FAB and Chesapeake Utilities

The main advantage of trading using opposite X FAB and Chesapeake Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB 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 X FAB Silicon Foundries 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.