Correlation Between San Juan and Chesapeake Granite

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

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

Diversification Opportunities for San Juan and Chesapeake Granite

0.46

Correlation Coefficient

San Juan  Chesapeake Granite

Very weak diversification

The 3 months correlation between San and Chesapeake is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding San Juan Basin 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 San Juan 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 San Juan Basin 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 San Juan i.e., San Juan and Chesapeake Granite go up and down completely randomly.

Pair Corralation between San Juan and Chesapeake Granite

Considering the 90-day investment horizon San Juan Basin is expected to under-perform the Chesapeake Granite. In addition to that, San Juan is 1.59 times more volatile than Chesapeake Granite Wash. It trades about -0.04 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 Together
Strength	Weak
Accuracy	27.82%
Values	Daily Returns

San Juan Basin  vs.  Chesapeake Granite Wash

San Juan Basin

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in San Juan Basin are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking indicators, San Juan 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 San Juan and Chesapeake Granite

The main advantage of trading using opposite San Juan and Chesapeake Granite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if San Juan 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 San Juan Basin 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.