Correlation Between Chevron Corp and Xtrackers Russell

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

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

Diversification Opportunities for Chevron Corp and Xtrackers Russell

0.2

Correlation Coefficient

Chevron Corp  Xtrackers Russell

Modest diversification

The 3 months correlation between Chevron and Xtrackers is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Xtrackers Russell Multifactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Russell 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 Xtrackers Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Russell has no effect on the direction of Chevron Corp i.e., Chevron Corp and Xtrackers Russell go up and down completely randomly.

Pair Corralation between Chevron Corp and Xtrackers Russell

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.76 times more return on investment than Xtrackers Russell. However, Chevron Corp is 1.76 times more volatile than Xtrackers Russell Multifactor. It trades about 0.2 of its potential returns per unit of risk. Xtrackers Russell Multifactor is currently generating about -0.02 per unit of risk. If you would invest  14,140  in Chevron Corp on December 21, 2024 and sell it today you would earn a total of  2,337  from holding Chevron Corp or generate 16.53% return on investment over 90 days.

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

Chevron Corp  vs.  Xtrackers Russell Multifactor

Chevron Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Chevron Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Xtrackers Russell

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtrackers Russell Multifactor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Xtrackers Russell is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Chevron Corp and Xtrackers Russell

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

The idea behind Chevron Corp and Xtrackers Russell Multifactor 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..