Correlation Between Chesapeake Finl and PSB Holdings

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

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

Diversification Opportunities for Chesapeake Finl and PSB Holdings

0.3

Correlation Coefficient

Chesapeake Finl  PSB Holdings

Weak diversification

The 3 months correlation between Chesapeake and PSB is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Finl Shs and PSB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSB Holdings and Chesapeake Finl 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 Finl Shs are associated (or correlated) with PSB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSB Holdings has no effect on the direction of Chesapeake Finl i.e., Chesapeake Finl and PSB Holdings go up and down completely randomly.

Pair Corralation between Chesapeake Finl and PSB Holdings

Given the investment horizon of 90 days Chesapeake Finl is expected to generate 6.65 times less return on investment than PSB Holdings. In addition to that, Chesapeake Finl is 1.26 times more volatile than PSB Holdings. It trades about 0.02 of its total potential returns per unit of risk. PSB Holdings is currently generating about 0.2 per unit of volatility. If you would invest  2,492  in PSB Holdings on August 31, 2024 and sell it today you would earn a total of  298.00  from holding PSB Holdings or generate 11.96% return on investment over 90 days.

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

Chesapeake Finl Shs  vs.  PSB Holdings

Chesapeake Finl Shs

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Finl Shs are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking signals, Chesapeake Finl is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PSB Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PSB Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, PSB Holdings may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Chesapeake Finl and PSB Holdings

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

The idea behind Chesapeake Finl Shs and PSB Holdings 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.