Correlation Between Chesapeake Utilities and BORR DRILLING

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

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

Diversification Opportunities for Chesapeake Utilities and BORR DRILLING

-0.74

Correlation Coefficient

Chesapeake Utilities  BORR DRILLING

Pay attention - limited upside

The 3 months correlation between Chesapeake and BORR is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Utilities and BORR DRILLING NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BORR DRILLING NEW and Chesapeake Utilities 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 Chesapeake Utilities are associated (or correlated) with BORR DRILLING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BORR DRILLING NEW has no effect on the direction of Chesapeake Utilities i.e., Chesapeake Utilities and BORR DRILLING go up and down completely randomly.

Pair Corralation between Chesapeake Utilities and BORR DRILLING

Assuming the 90 days horizon Chesapeake Utilities is expected to generate 0.39 times more return on investment than BORR DRILLING. However, Chesapeake Utilities is 2.57 times less risky than BORR DRILLING. It trades about 0.04 of its potential returns per unit of risk. BORR DRILLING NEW is currently generating about -0.13 per unit of risk. If you would invest  11,044  in Chesapeake Utilities on September 23, 2024 and sell it today you would earn a total of  356.00  from holding Chesapeake Utilities or generate 3.22% return on investment over 90 days.

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

Chesapeake Utilities  vs.  BORR DRILLING NEW

Chesapeake Utilities

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Utilities are ranked lower than 3 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

BORR DRILLING NEW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BORR DRILLING NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile 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.

Pair Trading with Chesapeake Utilities and BORR DRILLING

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

The idea behind Chesapeake Utilities and BORR DRILLING NEW 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.