Correlation Between Chevron and Performance Food

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

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

Diversification Opportunities for Chevron and Performance Food

0.8

Correlation Coefficient

Chevron  Performance Food

Very poor diversification

The 3 months correlation between Chevron and Performance is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Chevron and Performance Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Food and Chevron 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 are associated (or correlated) with Performance Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Food has no effect on the direction of Chevron i.e., Chevron and Performance Food go up and down completely randomly.

Pair Corralation between Chevron and Performance Food

Assuming the 90 days horizon Chevron is expected to generate 20.51 times less return on investment than Performance Food. But when comparing it to its historical volatility, Chevron is 1.09 times less risky than Performance Food. It trades about 0.01 of its potential returns per unit of risk. Performance Food Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,200  in Performance Food Group on October 5, 2024 and sell it today you would earn a total of  2,900  from holding Performance Food Group or generate 55.77% return on investment over 90 days.

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

Chevron  vs.  Performance Food Group

Chevron

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Chevron is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Performance Food

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Performance Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Performance Food unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chevron and Performance Food

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

The idea behind Chevron and Performance Food Group 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.