Correlation Between Chevron Corp and AuraSource

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

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

Diversification Opportunities for Chevron Corp and AuraSource

-0.72

Correlation Coefficient

Chevron Corp  AuraSource

Pay attention - limited upside

The 3 months correlation between Chevron and AuraSource is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and AuraSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AuraSource 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 AuraSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AuraSource has no effect on the direction of Chevron Corp i.e., Chevron Corp and AuraSource go up and down completely randomly.

Pair Corralation between Chevron Corp and AuraSource

Considering the 90-day investment horizon Chevron Corp is expected to generate 0.06 times more return on investment than AuraSource. However, Chevron Corp is 15.49 times less risky than AuraSource. It trades about 0.18 of its potential returns per unit of risk. AuraSource is currently generating about -0.18 per unit of risk. If you would invest  14,320  in Chevron Corp on August 31, 2024 and sell it today you would earn a total of  1,891  from holding Chevron Corp or generate 13.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Chevron Corp  vs.  AuraSource

Chevron Corp

Risk-Adjusted Performance

13 of 100

Good

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

AuraSource

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AuraSource has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Chevron Corp and AuraSource

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

The idea behind Chevron Corp and AuraSource 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.