Correlation Between Chesapeake Energy and American Airlines
Can any of the company-specific risk be diversified away by investing in both Chesapeake Energy and American Airlines 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 American Airlines 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 American Airlines Group, you can compare the effects of market volatilities on Chesapeake Energy and American Airlines 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 American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chesapeake Energy and American Airlines.
Diversification Opportunities for Chesapeake Energy and American Airlines
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Chesapeake and American is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Energy Corp and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Chesapeake Energy i.e., Chesapeake Energy and American Airlines go up and down completely randomly.
Pair Corralation between Chesapeake Energy and American Airlines
Considering the 90-day investment horizon Chesapeake Energy Corp is expected to generate 0.84 times more return on investment than American Airlines. However, Chesapeake Energy Corp is 1.2 times less risky than American Airlines. It trades about 0.02 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.01 per unit of risk. If you would invest 8,311 in Chesapeake Energy Corp on January 24, 2024 and sell it today you would earn a total of 542.00 from holding Chesapeake Energy Corp or generate 6.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Chesapeake Energy Corp vs. American Airlines Group
Performance |
| Timeline |
| Chesapeake Energy Corp |
| American Airlines |
Chesapeake Energy and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chesapeake Energy and American Airlines
The main advantage of trading using opposite Chesapeake Energy and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chesapeake Energy position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| Chesapeake Energy vs. Range Resources Corp | Chesapeake Energy vs. Antero Resources Corp | Chesapeake Energy vs. EQT Corporation | Chesapeake Energy vs. Comstock Resources |
| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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