Correlation Between CHEVRON CDR and First Capital

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

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

Diversification Opportunities for CHEVRON CDR and First Capital

-0.4

Correlation Coefficient

CHEVRON CDR  First Capital

Very good diversification

The 3 months correlation between CHEVRON and First is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding CHEVRON CDR and First Capital Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital Real and CHEVRON CDR 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 CHEVRON CDR are associated (or correlated) with First Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Capital Real has no effect on the direction of CHEVRON CDR i.e., CHEVRON CDR and First Capital go up and down completely randomly.

Pair Corralation between CHEVRON CDR and First Capital

Assuming the 90 days trading horizon CHEVRON CDR is expected to generate 1.31 times more return on investment than First Capital. However, CHEVRON CDR is 1.31 times more volatile than First Capital Real. It trades about 0.2 of its potential returns per unit of risk. First Capital Real is currently generating about 0.0 per unit of risk. If you would invest  1,887  in CHEVRON CDR on September 4, 2024 and sell it today you would earn a total of  286.00  from holding CHEVRON CDR or generate 15.16% return on investment over 90 days.

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

CHEVRON CDR  vs.  First Capital Real

CHEVRON CDR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CHEVRON CDR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, CHEVRON CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

First Capital Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Capital Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, First Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CHEVRON CDR and First Capital

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

The idea behind CHEVRON CDR and First Capital Real 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 CEOs Directory module to screen CEOs from public companies around the world.