Correlation Between Chesapeake Energy and Cleveland Cliffs
Can any of the company-specific risk be diversified away by investing in both Chesapeake Energy and Cleveland Cliffs 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 Cleveland Cliffs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chesapeake Energy Corp and Cleveland Cliffs, you can compare the effects of market volatilities on Chesapeake Energy and Cleveland Cliffs 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 Cleveland Cliffs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chesapeake Energy and Cleveland Cliffs.
Diversification Opportunities for Chesapeake Energy and Cleveland Cliffs
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Chesapeake and Cleveland is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Energy Corp and Cleveland Cliffs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleveland Cliffs 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 Corp are associated (or correlated) with Cleveland Cliffs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cleveland Cliffs has no effect on the direction of Chesapeake Energy i.e., Chesapeake Energy and Cleveland Cliffs go up and down completely randomly.
Pair Corralation between Chesapeake Energy and Cleveland Cliffs
Considering the 90-day investment horizon Chesapeake Energy Corp is expected to generate 0.87 times more return on investment than Cleveland Cliffs. However, Chesapeake Energy Corp is 1.15 times less risky than Cleveland Cliffs. It trades about 0.11 of its potential returns per unit of risk. Cleveland Cliffs is currently generating about 0.01 per unit of risk. If you would invest 7,679 in Chesapeake Energy Corp on January 20, 2024 and sell it today you would earn a total of 1,072 from holding Chesapeake Energy Corp or generate 13.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chesapeake Energy Corp vs. Cleveland Cliffs
Performance |
| Timeline |
| Chesapeake Energy Corp |
| Cleveland Cliffs |
Chesapeake Energy and Cleveland Cliffs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chesapeake Energy and Cleveland Cliffs
The main advantage of trading using opposite Chesapeake Energy and Cleveland Cliffs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chesapeake Energy position performs unexpectedly, Cleveland Cliffs 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 Cleveland Cliffs will offset losses from the drop in Cleveland Cliffs' long position.| Chesapeake Energy vs. Range Resources Corp | Chesapeake Energy vs. Antero Resources Corp | Chesapeake Energy vs. EQT Corporation | Chesapeake Energy vs. Comstock Resources |
| Cleveland Cliffs vs. Nucor Corp | Cleveland Cliffs vs. Steel Dynamics | Cleveland Cliffs vs. ArcelorMittal SA ADR | Cleveland Cliffs vs. Gerdau SA ADR |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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