Correlation Between Enservco and Chesapeake Energy

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

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

Diversification Opportunities for Enservco and Chesapeake Energy

0.45

Correlation Coefficient

Enservco  Chesapeake Energy

Very weak diversification

The 3 months correlation between Enservco and Chesapeake is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Enservco Co 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 Enservco 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 Enservco Co 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 Enservco i.e., Enservco and Chesapeake Energy go up and down completely randomly.

Pair Corralation between Enservco and Chesapeake Energy

Given the investment horizon of 90 days Enservco Co is expected to generate 6.01 times more return on investment than Chesapeake Energy. However, Enservco is 6.01 times more volatile than Chesapeake Energy Corp. It trades about 0.09 of its potential returns per unit of risk. Chesapeake Energy Corp is currently generating about 0.14 per unit of risk. If you would invest  21.00  in Enservco Co on February 22, 2024 and sell it today you would earn a total of  6.08  from holding Enservco Co or generate 28.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.92%
Values	Daily Returns

Enservco Co  vs.  Chesapeake Energy Corp

Enservco

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Enservco Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Enservco showed 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 may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Enservco and Chesapeake Energy

The main advantage of trading using opposite Enservco and Chesapeake Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enservco 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 Enservco Co 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..