Correlation Between Chesapeake Utilities and Ecolab

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

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

Diversification Opportunities for Chesapeake Utilities and Ecolab

-0.78

Correlation Coefficient

Chesapeake Utilities  Ecolab

Pay attention - limited upside

The 3 months correlation between Chesapeake and Ecolab is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Utilities and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc 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 Ecolab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecolab Inc has no effect on the direction of Chesapeake Utilities i.e., Chesapeake Utilities and Ecolab go up and down completely randomly.

Pair Corralation between Chesapeake Utilities and Ecolab

Assuming the 90 days horizon Chesapeake Utilities is expected to under-perform the Ecolab. In addition to that, Chesapeake Utilities is 1.24 times more volatile than Ecolab Inc. It trades about -0.1 of its total potential returns per unit of risk. Ecolab Inc is currently generating about 0.17 per unit of volatility. If you would invest  20,140  in Ecolab Inc on April 21, 2025 and sell it today you would earn a total of  2,960  from holding Ecolab Inc or generate 14.7% return on investment over 90 days.

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

Chesapeake Utilities  vs.  Ecolab Inc

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 uncertain 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.

Ecolab Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ecolab reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chesapeake Utilities and Ecolab

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

The idea behind Chesapeake Utilities and Ecolab Inc 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.