Correlation Between Chesapeake Energy and AgroFresh Solutions

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

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

Diversification Opportunities for Chesapeake Energy and AgroFresh Solutions

0.8

Correlation Coefficient

Chesapeake Energy  AgroFresh Solutions

Very poor diversification

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

Pair Corralation between Chesapeake Energy and AgroFresh Solutions

If you would invest  6,478  in Chesapeake Energy on January 29, 2024 and sell it today you would earn a total of  972.00  from holding Chesapeake Energy or generate 15.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	2.33%
Values	Daily Returns

Chesapeake Energy  vs.  AgroFresh Solutions

Chesapeake Energy

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Energy are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Chesapeake Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

AgroFresh Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AgroFresh Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, AgroFresh Solutions is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Chesapeake Energy and AgroFresh Solutions

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

The idea behind Chesapeake Energy and AgroFresh Solutions 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.