Correlation Between Chevron Corp and Masco

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

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

Diversification Opportunities for Chevron Corp and Masco

0.77

Correlation Coefficient

Chevron Corp  Masco

Poor diversification

The 3 months correlation between Chevron and Masco is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Masco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masco 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 are associated (or correlated) with Masco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masco has no effect on the direction of Chevron Corp i.e., Chevron Corp and Masco go up and down completely randomly.

Pair Corralation between Chevron Corp and Masco

Assuming the 90 days trading horizon Chevron Corp is expected to generate 26.46 times more return on investment than Masco. However, Chevron Corp is 26.46 times more volatile than Masco. It trades about 0.01 of its potential returns per unit of risk. Masco is currently generating about 0.13 per unit of risk. If you would invest  281,614  in Chevron Corp on September 23, 2024 and sell it today you would earn a total of  3,086  from holding Chevron Corp or generate 1.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.21%
Values	Daily Returns

Chevron Corp  vs.  Masco

Chevron Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly 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.

Masco

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Masco are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Masco is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chevron Corp and Masco

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

The idea behind Chevron Corp and Masco 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.