Correlation Between Chevron Corp and Dimensional Equity

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

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

Diversification Opportunities for Chevron Corp and Dimensional Equity

-0.37

Correlation Coefficient

Chevron Corp  Dimensional Equity

Very good diversification

The 3 months correlation between Chevron and Dimensional is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Dimensional Equity ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Equity ETF 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 Dimensional Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Equity ETF has no effect on the direction of Chevron Corp i.e., Chevron Corp and Dimensional Equity go up and down completely randomly.

Pair Corralation between Chevron Corp and Dimensional Equity

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.28 times more return on investment than Dimensional Equity. However, Chevron Corp is 1.28 times more volatile than Dimensional Equity ETF. It trades about 0.2 of its potential returns per unit of risk. Dimensional Equity ETF is currently generating about -0.09 per unit of risk. If you would invest  14,150  in Chevron Corp on December 30, 2024 and sell it today you would earn a total of  2,459  from holding Chevron Corp or generate 17.38% return on investment over 90 days.

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

Chevron Corp  vs.  Dimensional Equity ETF

Chevron Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 16 (%) 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.

Dimensional Equity ETF

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Chevron Corp and Dimensional Equity

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

The idea behind Chevron Corp and Dimensional Equity ETF 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.