Correlation Between Boat Rocker and CHEVRON CDR

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

By analyzing existing cross correlation between Boat Rocker Media and CHEVRON CDR, you can compare the effects of market volatilities on Boat Rocker and CHEVRON CDR 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 Boat Rocker with a short position of CHEVRON CDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boat Rocker and CHEVRON CDR.

Diversification Opportunities for Boat Rocker and CHEVRON CDR

0.59

Correlation Coefficient

Boat Rocker  CHEVRON CDR

Very weak diversification

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

Pair Corralation between Boat Rocker and CHEVRON CDR

Assuming the 90 days trading horizon Boat Rocker Media is expected to generate 2.42 times more return on investment than CHEVRON CDR. However, Boat Rocker is 2.42 times more volatile than CHEVRON CDR. It trades about 0.08 of its potential returns per unit of risk. CHEVRON CDR is currently generating about 0.17 per unit of risk. If you would invest  60.00  in Boat Rocker Media on December 30, 2024 and sell it today you would earn a total of  9.00  from holding Boat Rocker Media or generate 15.0% return on investment over 90 days.

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

Boat Rocker Media  vs.  CHEVRON CDR

Boat Rocker Media

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Boat Rocker Media are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Boat Rocker displayed solid returns over the last few months and may actually be approaching a breakup point.

CHEVRON CDR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHEVRON CDR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, CHEVRON CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boat Rocker and CHEVRON CDR

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

The idea behind Boat Rocker Media and CHEVRON CDR 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.