Correlation Between Chevron Corp and A1

Can any of the company-specific risk be diversified away by investing in both Chevron Corp and A1 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 A1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chevron Corp and A1 Group, you can compare the effects of market volatilities on Chevron Corp and A1 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 A1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and A1.

Diversification Opportunities for Chevron Corp and A1

-0.54

Correlation Coefficient

Chevron Corp  A1

Excellent diversification

The 3 months correlation between Chevron and A1 is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and A1 Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A1 Group 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 A1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A1 Group has no effect on the direction of Chevron Corp i.e., Chevron Corp and A1 go up and down completely randomly.

Pair Corralation between Chevron Corp and A1

Considering the 90-day investment horizon Chevron Corp is expected to generate 16.46 times less return on investment than A1. But when comparing it to its historical volatility, Chevron Corp is 12.35 times less risky than A1. It trades about 0.04 of its potential returns per unit of risk. A1 Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.50  in A1 Group on December 2, 2024 and sell it today you would lose (0.30) from holding A1 Group or give up 60.0% of portfolio value over 90 days.

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

Chevron Corp  vs.  A1 Group

Chevron Corp

Risk-Adjusted Performance

Very Weak

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

A1 Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in A1 Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, A1 displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chevron Corp and A1

The main advantage of trading using opposite Chevron Corp and A1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, A1 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 A1 will offset losses from the drop in A1's long position.

The idea behind Chevron Corp and A1 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.