Correlation Between Chesapeake Energy and Nocopi Technologies

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

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

Diversification Opportunities for Chesapeake Energy and Nocopi Technologies

0.84

Correlation Coefficient

Chesapeake Energy  Nocopi Technologies

Very poor diversification

The 3 months correlation between Chesapeake and Nocopi is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Energy and Nocopi Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nocopi Technologies 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 Nocopi Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nocopi Technologies has no effect on the direction of Chesapeake Energy i.e., Chesapeake Energy and Nocopi Technologies go up and down completely randomly.

Pair Corralation between Chesapeake Energy and Nocopi Technologies

Assuming the 90 days horizon Chesapeake Energy is expected to generate 0.77 times more return on investment than Nocopi Technologies. However, Chesapeake Energy is 1.3 times less risky than Nocopi Technologies. It trades about 0.37 of its potential returns per unit of risk. Nocopi Technologies is currently generating about -0.07 per unit of risk. If you would invest  5,684  in Chesapeake Energy on September 14, 2024 and sell it today you would earn a total of  720.00  from holding Chesapeake Energy or generate 12.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	20.63%
Values	Daily Returns

Chesapeake Energy  vs.  Nocopi Technologies

Chesapeake Energy

Risk-Adjusted Performance

0 of 100

Strong

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 conflicting technical and fundamental indicators, Chesapeake Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Nocopi Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nocopi Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Chesapeake Energy and Nocopi Technologies

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

The idea behind Chesapeake Energy and Nocopi Technologies 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.