Correlation Between Chevron Corp and EnQuest PLC

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

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

Diversification Opportunities for Chevron Corp and EnQuest PLC

0.28

Correlation Coefficient

Chevron Corp  EnQuest PLC

Modest diversification

The 3 months correlation between Chevron and EnQuest is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and EnQuest PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EnQuest PLC 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 EnQuest PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EnQuest PLC has no effect on the direction of Chevron Corp i.e., Chevron Corp and EnQuest PLC go up and down completely randomly.

Pair Corralation between Chevron Corp and EnQuest PLC

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.24 times less return on investment than EnQuest PLC. But when comparing it to its historical volatility, Chevron Corp is 3.98 times less risky than EnQuest PLC. It trades about 0.21 of its potential returns per unit of risk. EnQuest PLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  14.00  in EnQuest PLC on December 29, 2024 and sell it today you would earn a total of  2.00  from holding EnQuest PLC or generate 14.29% 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.  EnQuest PLC

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.

EnQuest PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EnQuest PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EnQuest PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chevron Corp and EnQuest PLC

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

The idea behind Chevron Corp and EnQuest PLC 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.