Correlation Between Global X and Chevron

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

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

Diversification Opportunities for Global X and Chevron

0.93

Correlation Coefficient

Global X  Chevron

Almost no diversification

The 3 months correlation between Global and Chevron is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Global X Funds and Chevron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron and Global X 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 Global X Funds are associated (or correlated) with Chevron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron has no effect on the direction of Global X i.e., Global X and Chevron go up and down completely randomly.

Pair Corralation between Global X and Chevron

Assuming the 90 days trading horizon Global X Funds is expected to generate 1.06 times more return on investment than Chevron. However, Global X is 1.06 times more volatile than Chevron. It trades about 0.19 of its potential returns per unit of risk. Chevron is currently generating about -0.01 per unit of risk. If you would invest  4,760  in Global X Funds on September 15, 2024 and sell it today you would earn a total of  260.00  from holding Global X Funds or generate 5.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

Global X Funds  vs.  Chevron

Global X Funds

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Global X sustained solid returns over the last few months and may actually be approaching a breakup point.

Chevron

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chevron sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global X and Chevron

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

The idea behind Global X Funds and Chevron 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .