Correlation Between Chesapeake Energy and Wesdome Gold
Can any of the company-specific risk be diversified away by investing in both Chesapeake Energy and Wesdome Gold 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 Wesdome Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chesapeake Energy and Wesdome Gold Mines, you can compare the effects of market volatilities on Chesapeake Energy and Wesdome Gold 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 Wesdome Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chesapeake Energy and Wesdome Gold.
Diversification Opportunities for Chesapeake Energy and Wesdome Gold
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Chesapeake and Wesdome is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Energy and Wesdome Gold Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesdome Gold Mines 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 Wesdome Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesdome Gold Mines has no effect on the direction of Chesapeake Energy i.e., Chesapeake Energy and Wesdome Gold go up and down completely randomly.
Pair Corralation between Chesapeake Energy and Wesdome Gold
Assuming the 90 days horizon Chesapeake Energy is expected to under-perform the Wesdome Gold. But the stock apears to be less risky and, when comparing its historical volatility, Chesapeake Energy is 2.12 times less risky than Wesdome Gold. The stock trades about -0.17 of its potential returns per unit of risk. The Wesdome Gold Mines is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 791.00 in Wesdome Gold Mines on March 28, 2024 and sell it today you would earn a total of 17.00 from holding Wesdome Gold Mines or generate 2.15% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Chesapeake Energy vs. Wesdome Gold Mines
Performance |
Timeline |
Chesapeake Energy |
Wesdome Gold Mines |
Chesapeake Energy and Wesdome Gold Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Chesapeake Energy and Wesdome Gold
The main advantage of trading using opposite Chesapeake Energy and Wesdome Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chesapeake Energy position performs unexpectedly, Wesdome Gold 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 Wesdome Gold will offset losses from the drop in Wesdome Gold's long position.Chesapeake Energy vs. NI Holdings | Chesapeake Energy vs. Cincinnati Financial | Chesapeake Energy vs. Shelf Drilling | Chesapeake Energy vs. United Fire Group |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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