Correlation Between Hotchkis Wiley and Chesapeake Growth

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

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

Diversification Opportunities for Hotchkis Wiley and Chesapeake Growth

0.47

Correlation Coefficient

Hotchkis Wiley  Chesapeake Growth

Very weak diversification

The 3 months correlation between Hotchkis and Chesapeake is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Hotchkis Wiley Large and The Chesapeake Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Growth and Hotchkis Wiley 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 Hotchkis Wiley Large are associated (or correlated) with Chesapeake Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Growth has no effect on the direction of Hotchkis Wiley i.e., Hotchkis Wiley and Chesapeake Growth go up and down completely randomly.

Pair Corralation between Hotchkis Wiley and Chesapeake Growth

Assuming the 90 days horizon Hotchkis Wiley is expected to generate 1.54 times less return on investment than Chesapeake Growth. In addition to that, Hotchkis Wiley is 1.33 times more volatile than The Chesapeake Growth. It trades about 0.03 of its total potential returns per unit of risk. The Chesapeake Growth is currently generating about 0.06 per unit of volatility. If you would invest  4,800  in The Chesapeake Growth on September 12, 2024 and sell it today you would earn a total of  587.00  from holding The Chesapeake Growth or generate 12.23% return on investment over 90 days.

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

Hotchkis Wiley Large  vs.  The Chesapeake Growth

Hotchkis Wiley Large

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hotchkis Wiley Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Hotchkis Wiley is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chesapeake Growth

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Chesapeake Growth are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Chesapeake Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hotchkis Wiley and Chesapeake Growth

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

The idea behind Hotchkis Wiley Large and The Chesapeake Growth 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.