Correlation Between Chongqing Machinery and Chevron

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

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

Diversification Opportunities for Chongqing Machinery and Chevron

0.08

Correlation Coefficient

Chongqing Machinery  Chevron

Significant diversification

The 3 months correlation between Chongqing and Chevron is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and Chevron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron and Chongqing Machinery 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 Chongqing Machinery Electric 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 Chongqing Machinery i.e., Chongqing Machinery and Chevron go up and down completely randomly.

Pair Corralation between Chongqing Machinery and Chevron

Assuming the 90 days horizon Chongqing Machinery Electric is expected to under-perform the Chevron. In addition to that, Chongqing Machinery is 6.64 times more volatile than Chevron. It trades about -0.03 of its total potential returns per unit of risk. Chevron is currently generating about 0.64 per unit of volatility. If you would invest  13,692  in Chevron on October 23, 2024 and sell it today you would earn a total of  1,988  from holding Chevron or generate 14.52% return on investment over 90 days.

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

Chongqing Machinery Electric  vs.  Chevron

Chongqing Machinery

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Machinery Electric are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Chongqing Machinery is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Chevron

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Chevron unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chongqing Machinery and Chevron

The main advantage of trading using opposite Chongqing Machinery and Chevron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Machinery 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 Chongqing Machinery Electric 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.