Correlation Between PVH Corp and Chesapeake Energy

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

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

Diversification Opportunities for PVH Corp and Chesapeake Energy

-0.75

Correlation Coefficient

PVH Corp  Chesapeake Energy

Pay attention - limited upside

The 3 months correlation between PVH and Chesapeake is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding PVH Corp and Chesapeake Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Energy and PVH Corp 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 PVH Corp 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 PVH Corp i.e., PVH Corp and Chesapeake Energy go up and down completely randomly.

Pair Corralation between PVH Corp and Chesapeake Energy

Considering the 90-day investment horizon PVH Corp is expected to generate 0.79 times more return on investment than Chesapeake Energy. However, PVH Corp is 1.26 times less risky than Chesapeake Energy. It trades about 0.02 of its potential returns per unit of risk. Chesapeake Energy is currently generating about -0.04 per unit of risk. If you would invest  10,506  in PVH Corp on September 27, 2024 and sell it today you would earn a total of  356.00  from holding PVH Corp or generate 3.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	52.8%
Values	Daily Returns

PVH Corp  vs.  Chesapeake Energy

PVH Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PVH Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, PVH Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Chesapeake Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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 strong technical and fundamental indicators, Chesapeake Energy is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PVH Corp and Chesapeake Energy

The main advantage of trading using opposite PVH Corp and Chesapeake Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PVH Corp 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 PVH Corp 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.