Correlation Between SHELF DRILLING and Chesapeake Utilities

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

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

Diversification Opportunities for SHELF DRILLING and Chesapeake Utilities

-0.78

Correlation Coefficient

SHELF DRILLING  Chesapeake Utilities

Pay attention - limited upside

The 3 months correlation between SHELF and Chesapeake is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding SHELF DRILLING LTD and Chesapeake Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Utilities and SHELF DRILLING 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 SHELF DRILLING LTD 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 SHELF DRILLING i.e., SHELF DRILLING and Chesapeake Utilities go up and down completely randomly.

Pair Corralation between SHELF DRILLING and Chesapeake Utilities

Assuming the 90 days horizon SHELF DRILLING LTD is expected to under-perform the Chesapeake Utilities. In addition to that, SHELF DRILLING is 3.99 times more volatile than Chesapeake Utilities. It trades about -0.09 of its total potential returns per unit of risk. Chesapeake Utilities is currently generating about 0.16 per unit of volatility. If you would invest  10,737  in Chesapeake Utilities on September 5, 2024 and sell it today you would earn a total of  1,663  from holding Chesapeake Utilities or generate 15.49% return on investment over 90 days.

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

SHELF DRILLING LTD  vs.  Chesapeake Utilities

SHELF DRILLING LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHELF DRILLING LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Chesapeake Utilities

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Utilities are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Chesapeake Utilities reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SHELF DRILLING and Chesapeake Utilities

The main advantage of trading using opposite SHELF DRILLING and Chesapeake Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SHELF DRILLING 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 SHELF DRILLING LTD 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.