Correlation Between Chevron Corp and FANH Old

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

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

Diversification Opportunities for Chevron Corp and FANH Old

-0.4

Correlation Coefficient

Chevron Corp  FANH Old

Very good diversification

The 3 months correlation between Chevron and FANH is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and FANH Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FANH Old 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 FANH Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FANH Old has no effect on the direction of Chevron Corp i.e., Chevron Corp and FANH Old go up and down completely randomly.

Pair Corralation between Chevron Corp and FANH Old

Considering the 90-day investment horizon Chevron Corp is expected to generate 0.31 times more return on investment than FANH Old. However, Chevron Corp is 3.22 times less risky than FANH Old. It trades about -0.01 of its potential returns per unit of risk. FANH Old is currently generating about -0.06 per unit of risk. If you would invest  16,512  in Chevron Corp on October 10, 2024 and sell it today you would lose (1,553) from holding Chevron Corp or give up 9.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	89.9%
Values	Daily Returns

Chevron Corp  vs.  FANH Old

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 current stock price disturbance, may contribute to short-term losses for the investors.

FANH Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FANH Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Chevron Corp and FANH Old

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

The idea behind Chevron Corp and FANH Old 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 Anywhere module to track or share privately all of your investments from the convenience of any device.