Correlation Between EQT and Chesapeake Energy

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

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

Diversification Opportunities for EQT and Chesapeake Energy

0.63

Correlation Coefficient

EQT  Chesapeake Energy

Poor diversification

The 3 months correlation between EQT and Chesapeake is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding EQT Corp. and Chesapeake Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Energy Corp and EQT 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 EQT Corporation 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 Corp has no effect on the direction of EQT i.e., EQT and Chesapeake Energy go up and down completely randomly.

Pair Corralation between EQT and Chesapeake Energy

Considering the 90-day investment horizon EQT is expected to generate 1.55 times less return on investment than Chesapeake Energy. In addition to that, EQT is 1.22 times more volatile than Chesapeake Energy Corp. It trades about 0.01 of its total potential returns per unit of risk. Chesapeake Energy Corp is currently generating about 0.01 per unit of volatility. If you would invest  8,611  in Chesapeake Energy Corp on February 11, 2024 and sell it today you would earn a total of  101.00  from holding Chesapeake Energy Corp or generate 1.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

EQT Corp.  vs.  Chesapeake Energy Corp

EQT Corporation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EQT Corporation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, EQT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Chesapeake Energy Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Energy Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady technical indicators, Chesapeake Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EQT and Chesapeake Energy

The main advantage of trading using opposite EQT and Chesapeake Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EQT 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 EQT Corporation and Chesapeake Energy Corp 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.