Correlation Between Chesapeake Energy and K92 Mining

Can any of the company-specific risk be diversified away by investing in both Chesapeake Energy and K92 Mining 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 K92 Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chesapeake Energy and K92 Mining, you can compare the effects of market volatilities on Chesapeake Energy and K92 Mining 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 K92 Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chesapeake Energy and K92 Mining.

Diversification Opportunities for Chesapeake Energy and K92 Mining

0.72

Correlation Coefficient

Chesapeake Energy  K92 Mining

Poor diversification

The 3 months correlation between Chesapeake and K92 is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Energy and K92 Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K92 Mining 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 K92 Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K92 Mining has no effect on the direction of Chesapeake Energy i.e., Chesapeake Energy and K92 Mining go up and down completely randomly.

Pair Corralation between Chesapeake Energy and K92 Mining

Assuming the 90 days horizon Chesapeake Energy is expected to under-perform the K92 Mining. In addition to that, Chesapeake Energy is 1.34 times more volatile than K92 Mining. It trades about -0.39 of its total potential returns per unit of risk. K92 Mining is currently generating about 0.09 per unit of volatility. If you would invest  512.00  in K92 Mining on February 4, 2024 and sell it today you would earn a total of  23.00  from holding K92 Mining or generate 4.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	27.27%
Values	Daily Returns

Chesapeake Energy  vs.  K92 Mining

Chesapeake Energy

Risk-Adjusted Performance

0 of 100

Solid

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 weak technical and fundamental indicators, Chesapeake Energy showed solid returns over the last few months and may actually be approaching a breakup point.

K92 Mining

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in K92 Mining are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, K92 Mining may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Chesapeake Energy and K92 Mining

The main advantage of trading using opposite Chesapeake Energy and K92 Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chesapeake Energy position performs unexpectedly, K92 Mining 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 K92 Mining will offset losses from the drop in K92 Mining's long position.

The idea behind Chesapeake Energy and K92 Mining 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.