Correlation Between Chesapeake Energy and Cordoba Minerals

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

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

Diversification Opportunities for Chesapeake Energy and Cordoba Minerals

0.67

Correlation Coefficient

Chesapeake Energy  Cordoba Minerals

Poor diversification

The 3 months correlation between Chesapeake and Cordoba is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Energy and Cordoba Minerals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cordoba Minerals 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 are associated (or correlated) with Cordoba Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cordoba Minerals Corp has no effect on the direction of Chesapeake Energy i.e., Chesapeake Energy and Cordoba Minerals go up and down completely randomly.

Pair Corralation between Chesapeake Energy and Cordoba Minerals

Assuming the 90 days horizon Chesapeake Energy is expected to generate 1.99 times less return on investment than Cordoba Minerals. But when comparing it to its historical volatility, Chesapeake Energy is 2.21 times less risky than Cordoba Minerals. It trades about 0.14 of its potential returns per unit of risk. Cordoba Minerals Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Cordoba Minerals Corp on February 11, 2024 and sell it today you would earn a total of  8.00  from holding Cordoba Minerals Corp or generate 28.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	39.53%
Values	Daily Returns

Chesapeake Energy  vs.  Cordoba Minerals Corp

Chesapeake Energy

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Chesapeake Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak technical and fundamental indicators, Chesapeake Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Cordoba Minerals Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cordoba Minerals Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Cordoba Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chesapeake Energy and Cordoba Minerals

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

The idea behind Chesapeake Energy and Cordoba Minerals 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.