Correlation Between Chesapeake Utilities and INVITATION HOMES

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

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

Diversification Opportunities for Chesapeake Utilities and INVITATION HOMES

0.73

Correlation Coefficient

Chesapeake Utilities  INVITATION HOMES

Poor diversification

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

Pair Corralation between Chesapeake Utilities and INVITATION HOMES

Assuming the 90 days horizon Chesapeake Utilities is expected to under-perform the INVITATION HOMES. In addition to that, Chesapeake Utilities is 1.45 times more volatile than INVITATION HOMES DL. It trades about -0.09 of its total potential returns per unit of risk. INVITATION HOMES DL is currently generating about -0.08 per unit of volatility. If you would invest  2,934  in INVITATION HOMES DL on April 25, 2025 and sell it today you would lose (174.00) from holding INVITATION HOMES DL or give up 5.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Chesapeake Utilities  vs.  INVITATION HOMES DL

Chesapeake Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chesapeake Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

INVITATION HOMES

Risk-Adjusted Performance

Very Weak

Over the last 90 days INVITATION HOMES DL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, INVITATION HOMES is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Chesapeake Utilities and INVITATION HOMES

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

The idea behind Chesapeake Utilities and INVITATION HOMES DL 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.