Correlation Between Chesapeake Granite and PetroShale

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

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

Diversification Opportunities for Chesapeake Granite and PetroShale

-0.68

Correlation Coefficient

Chesapeake Granite  PetroShale

Excellent diversification

The 3 months correlation between Chesapeake and PetroShale is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Granite Wash and PetroShale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroShale and Chesapeake Granite 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 Granite Wash are associated (or correlated) with PetroShale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroShale has no effect on the direction of Chesapeake Granite i.e., Chesapeake Granite and PetroShale go up and down completely randomly.

Pair Corralation between Chesapeake Granite and PetroShale

Given the investment horizon of 90 days Chesapeake Granite Wash is expected to generate 0.55 times more return on investment than PetroShale. However, Chesapeake Granite Wash is 1.82 times less risky than PetroShale. It trades about 0.08 of its potential returns per unit of risk. PetroShale is currently generating about -0.01 per unit of risk. If you would invest  101.00  in Chesapeake Granite Wash on September 26, 2024 and sell it today you would earn a total of  17.00  from holding Chesapeake Granite Wash or generate 16.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	27.82%
Values	Daily Returns

Chesapeake Granite Wash  vs.  PetroShale

Chesapeake Granite Wash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chesapeake Granite Wash has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Chesapeake Granite is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

PetroShale

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PetroShale 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 forward 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 Granite and PetroShale

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

The idea behind Chesapeake Granite Wash and PetroShale 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.