Correlation Between RGC Resources and Chesapeake Utilities

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

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

Diversification Opportunities for RGC Resources and Chesapeake Utilities

0.52

Correlation Coefficient

RGC Resources  Chesapeake Utilities

Very weak diversification

The 3 months correlation between RGC and Chesapeake is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding RGC Resources and Chesapeake Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Utilities and RGC Resources 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 RGC Resources are associated (or correlated) with Chesapeake Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Utilities has no effect on the direction of RGC Resources i.e., RGC Resources and Chesapeake Utilities go up and down completely randomly.

Pair Corralation between RGC Resources and Chesapeake Utilities

Given the investment horizon of 90 days RGC Resources is expected to generate 1.85 times less return on investment than Chesapeake Utilities. In addition to that, RGC Resources is 1.7 times more volatile than Chesapeake Utilities. It trades about 0.02 of its total potential returns per unit of risk. Chesapeake Utilities is currently generating about 0.06 per unit of volatility. If you would invest  10,194  in Chesapeake Utilities on March 14, 2024 and sell it today you would earn a total of  450.00  from holding Chesapeake Utilities or generate 4.41% return on investment over 90 days.

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

RGC Resources  vs.  Chesapeake Utilities

RGC Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RGC Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, RGC Resources is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Chesapeake Utilities

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Utilities are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Chesapeake Utilities is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with RGC Resources and Chesapeake Utilities

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

The idea behind RGC Resources and Chesapeake Utilities 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.