Correlation Between Chesapeake Energy and Exxon

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

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

Diversification Opportunities for Chesapeake Energy and Exxon

0.73
  Correlation Coefficient
Chesapeake Energy Corp
Exxon Mobil Corp

Poor diversification

The 3 months correlation between Chesapeake and Exxon is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Energy Corp and Exxon Mobil Corp in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp 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 Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil Corp has no effect on the direction of Chesapeake Energy i.e., Chesapeake Energy and Exxon go up and down completely randomly.

Pair Corralation between Chesapeake Energy and Exxon

Considering the 90-day investment horizon Chesapeake Energy is expected to generate 1.1 times less return on investment than Exxon. In addition to that, Chesapeake Energy is 1.24 times more volatile than Exxon Mobil Corp. It trades about 0.07 of its total potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.1 per unit of volatility. If you would invest  3,979  in Exxon Mobil Corp on September 4, 2021 and sell it today you would earn a total of  2,090  from holding Exxon Mobil Corp or generate 52.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy82.8%
ValuesDaily Returns

Chesapeake Energy Corp  vs.  Exxon Mobil Corp

 Performance (%) 
      Timeline 
Chesapeake Energy Corp 
Chesapeake Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Energy Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Chesapeake Energy is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Chesapeake Price Channel

Exxon Mobil Corp 
Exxon Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Exxon revealed solid returns over the last few months and may actually be approaching a breakup point.

Exxon Price Channel

Chesapeake Energy and Exxon Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Chesapeake Energy and Exxon

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

Chesapeake Energy Corp

Pair trading matchups for Chesapeake Energy

The idea behind Chesapeake Energy Corp and Exxon Mobil 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.
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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