Correlation Between Jabil Circuit and Chesapeake Energy

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

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

Diversification Opportunities for Jabil Circuit and Chesapeake Energy

-0.65

Correlation Coefficient

Jabil Circuit  Chesapeake Energy

Excellent diversification

The 3 months correlation between Jabil and Chesapeake is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Jabil Circuit and Chesapeake Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Energy and Jabil Circuit 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 Jabil Circuit are associated (or correlated) with Chesapeake Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Energy has no effect on the direction of Jabil Circuit i.e., Jabil Circuit and Chesapeake Energy go up and down completely randomly.

Pair Corralation between Jabil Circuit and Chesapeake Energy

Considering the 90-day investment horizon Jabil Circuit is expected to generate 1.09 times more return on investment than Chesapeake Energy. However, Jabil Circuit is 1.09 times more volatile than Chesapeake Energy. It trades about 0.07 of its potential returns per unit of risk. Chesapeake Energy is currently generating about -0.01 per unit of risk. If you would invest  6,854  in Jabil Circuit on September 14, 2024 and sell it today you would earn a total of  6,510  from holding Jabil Circuit or generate 94.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	89.88%
Values	Daily Returns

Jabil Circuit  vs.  Chesapeake Energy

Jabil Circuit

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jabil Circuit are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental drivers, Jabil Circuit disclosed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Jabil Circuit and Chesapeake Energy

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

The idea behind Jabil Circuit and Chesapeake Energy 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.