Correlation Between Chesapeake Energy and American Creek

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

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

Diversification Opportunities for Chesapeake Energy and American Creek

-0.8

Correlation Coefficient

Chesapeake Energy  American Creek

Pay attention - limited upside

The 3 months correlation between Chesapeake and American is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Energy and American Creek Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Creek Resources 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 American Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Creek Resources has no effect on the direction of Chesapeake Energy i.e., Chesapeake Energy and American Creek go up and down completely randomly.

Pair Corralation between Chesapeake Energy and American Creek

If you would invest  6,404  in Chesapeake Energy on September 16, 2024 and sell it today you would earn a total of  0.00  from holding Chesapeake Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

Chesapeake Energy  vs.  American Creek Resources

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

American Creek Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Creek Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, American Creek may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Chesapeake Energy and American Creek

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

The idea behind Chesapeake Energy and American Creek Resources 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.