Correlation Between Chesapeake Growth and Emerald Growth

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

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

Diversification Opportunities for Chesapeake Growth and Emerald Growth

0.79

Correlation Coefficient

Chesapeake Growth  Emerald Growth

Poor diversification

The 3 months correlation between Chesapeake and Emerald is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding The Chesapeake Growth and Emerald Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerald Growth and Chesapeake Growth 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 The Chesapeake Growth are associated (or correlated) with Emerald Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerald Growth has no effect on the direction of Chesapeake Growth i.e., Chesapeake Growth and Emerald Growth go up and down completely randomly.

Pair Corralation between Chesapeake Growth and Emerald Growth

Assuming the 90 days horizon The Chesapeake Growth is expected to generate 0.41 times more return on investment than Emerald Growth. However, The Chesapeake Growth is 2.46 times less risky than Emerald Growth. It trades about 0.07 of its potential returns per unit of risk. Emerald Growth Fund is currently generating about -0.01 per unit of risk. If you would invest  5,223  in The Chesapeake Growth on September 29, 2024 and sell it today you would earn a total of  163.00  from holding The Chesapeake Growth or generate 3.12% return on investment over 90 days.

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

The Chesapeake Growth  vs.  Emerald Growth Fund

Chesapeake Growth

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Chesapeake Growth are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Chesapeake Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Emerald Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emerald Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Emerald Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chesapeake Growth and Emerald Growth

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

The idea behind The Chesapeake Growth and Emerald Growth Fund 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.