Correlation Between Apple and Chevron Corp

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

By analyzing existing cross correlation between Apple Inc and Chevron Corp, you can compare the effects of market volatilities on Apple and Chevron Corp 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 Apple with a short position of Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Chevron Corp.

Diversification Opportunities for Apple and Chevron Corp

-0.59

Correlation Coefficient

Apple  Chevron Corp

Excellent diversification

The 3 months correlation between Apple and Chevron is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp and Apple 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 Apple Inc are associated (or correlated) with Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of Apple i.e., Apple and Chevron Corp go up and down completely randomly.

Pair Corralation between Apple and Chevron Corp

Given the investment horizon of 90 days Apple Inc is expected to generate 1.13 times more return on investment than Chevron Corp. However, Apple is 1.13 times more volatile than Chevron Corp. It trades about 0.07 of its potential returns per unit of risk. Chevron Corp is currently generating about -0.02 per unit of risk. If you would invest  23,467  in Apple Inc on November 27, 2024 and sell it today you would earn a total of  1,237  from holding Apple Inc or generate 5.27% return on investment over 90 days.

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

Apple Inc  vs.  Chevron Corp

Apple Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Apple is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Chevron Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chevron Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chevron Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Apple and Chevron Corp

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

The idea behind Apple Inc and Chevron 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.