Correlation Between Chesapeake Energy and El Capitan

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

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

Diversification Opportunities for Chesapeake Energy and El Capitan

-0.86

Correlation Coefficient

Chesapeake Energy  El Capitan

Pay attention - limited upside

The 3 months correlation between Chesapeake and ECPN is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Energy and El Capitan Prec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on El Capitan Prec and Chesapeake Energy 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 Chesapeake Energy are associated (or correlated) with El Capitan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of El Capitan Prec has no effect on the direction of Chesapeake Energy i.e., Chesapeake Energy and El Capitan go up and down completely randomly.

Pair Corralation between Chesapeake Energy and El Capitan

If you would invest  7,430  in Chesapeake Energy on January 30, 2024 and sell it today you would earn a total of  20.00  from holding Chesapeake Energy or generate 0.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Chesapeake Energy  vs.  El Capitan Prec

Chesapeake Energy

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Energy are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Chesapeake Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

El Capitan Prec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days El Capitan Prec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Chesapeake Energy and El Capitan

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

The idea behind Chesapeake Energy and El Capitan Prec 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.