Correlation Between Cross Timbers and Chesapeake Granite

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

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

Diversification Opportunities for Cross Timbers and Chesapeake Granite

-0.22

Correlation Coefficient

Cross Timbers  Chesapeake Granite

Very good diversification

The 3 months correlation between Cross and Chesapeake is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Cross Timbers Royalty and Chesapeake Granite Wash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Granite Wash and Cross Timbers 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 Cross Timbers Royalty are associated (or correlated) with Chesapeake Granite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Granite Wash has no effect on the direction of Cross Timbers i.e., Cross Timbers and Chesapeake Granite go up and down completely randomly.

Pair Corralation between Cross Timbers and Chesapeake Granite

Considering the 90-day investment horizon Cross Timbers Royalty is expected to under-perform the Chesapeake Granite. In addition to that, Cross Timbers is 1.85 times more volatile than Chesapeake Granite Wash. It trades about -0.03 of its total potential returns per unit of risk. Chesapeake Granite Wash is currently generating about 0.08 per unit of volatility. 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	Insignificant
Accuracy	27.82%
Values	Daily Returns

Cross Timbers Royalty  vs.  Chesapeake Granite Wash

Cross Timbers Royalty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cross Timbers Royalty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cross Timbers is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Cross Timbers and Chesapeake Granite

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

The idea behind Cross Timbers Royalty and Chesapeake Granite Wash 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.