Correlation Between Chesapeake Energy and Aurion Resources

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

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

Diversification Opportunities for Chesapeake Energy and Aurion Resources

-0.45

Correlation Coefficient

Chesapeake Energy  Aurion Resources

Very good diversification

The 3 months correlation between Chesapeake and Aurion is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Energy and Aurion Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurion Resources and Chesapeake Energy 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 Energy are associated (or correlated) with Aurion Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurion Resources has no effect on the direction of Chesapeake Energy i.e., Chesapeake Energy and Aurion Resources go up and down completely randomly.

Pair Corralation between Chesapeake Energy and Aurion Resources

Assuming the 90 days horizon Chesapeake Energy is expected to generate 0.64 times more return on investment than Aurion Resources. However, Chesapeake Energy is 1.57 times less risky than Aurion Resources. It trades about 0.24 of its potential returns per unit of risk. Aurion Resources is currently generating about 0.04 per unit of risk. If you would invest  5,770  in Chesapeake Energy on August 31, 2024 and sell it today you would earn a total of  634.00  from holding Chesapeake Energy or generate 10.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	34.92%
Values	Daily Returns

Chesapeake Energy  vs.  Aurion Resources

Chesapeake Energy

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Chesapeake Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unsteady technical and fundamental indicators, Chesapeake Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Aurion Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aurion Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aurion Resources may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Chesapeake Energy and Aurion Resources

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

The idea behind Chesapeake Energy and Aurion Resources 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.