Correlation Between Chevron Corp and Walmart

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

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

Diversification Opportunities for Chevron Corp and Walmart

-0.14

Correlation Coefficient

Chevron Corp  Walmart

Good diversification

The 3 months correlation between Chevron and Walmart is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp CEDEAR and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Chevron Corp 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 Corp CEDEAR are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Chevron Corp i.e., Chevron Corp and Walmart go up and down completely randomly.

Pair Corralation between Chevron Corp and Walmart

Assuming the 90 days trading horizon Chevron Corp CEDEAR is expected to generate 0.57 times more return on investment than Walmart. However, Chevron Corp CEDEAR is 1.76 times less risky than Walmart. It trades about -0.04 of its potential returns per unit of risk. Walmart is currently generating about -0.03 per unit of risk. If you would invest  1,800,300  in Chevron Corp CEDEAR on September 14, 2024 and sell it today you would lose (765,300) from holding Chevron Corp CEDEAR or give up 42.51% of portfolio value over 90 days.

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

Chevron Corp CEDEAR  vs.  Walmart

Chevron Corp CEDEAR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Walmart

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Walmart 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 Corp and Walmart

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

The idea behind Chevron Corp CEDEAR and Walmart 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.