Correlation Between Chevron Corp and Capital Group

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

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

Diversification Opportunities for Chevron Corp and Capital Group

0.65

Correlation Coefficient

Chevron Corp  Capital Group

Poor diversification

The 3 months correlation between Chevron and Capital is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Capital Group Conservative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Conser 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 Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group Conser has no effect on the direction of Chevron Corp i.e., Chevron Corp and Capital Group go up and down completely randomly.

Pair Corralation between Chevron Corp and Capital Group

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.82 times more return on investment than Capital Group. However, Chevron Corp is 1.82 times more volatile than Capital Group Conservative. It trades about 0.01 of its potential returns per unit of risk. Capital Group Conservative is currently generating about -0.04 per unit of risk. If you would invest  14,725  in Chevron Corp on October 8, 2024 and sell it today you would earn a total of  1.00  from holding Chevron Corp or generate 0.01% return on investment over 90 days.

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

Chevron Corp  vs.  Capital Group Conservative

Chevron Corp

Risk-Adjusted Performance

0 of 100

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.

Capital Group Conser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Group Conservative has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Capital Group is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Chevron Corp and Capital Group

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

The idea behind Chevron Corp and Capital Group Conservative 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.