Correlation Between Chevron Corp and American Century

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

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

Diversification Opportunities for Chevron Corp and American Century

0.63

Correlation Coefficient

Chevron Corp  American Century

Poor diversification

The 3 months correlation between Chevron and American is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and American Century ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century 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 American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century ETF has no effect on the direction of Chevron Corp i.e., Chevron Corp and American Century go up and down completely randomly.

Pair Corralation between Chevron Corp and American Century

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.65 times more return on investment than American Century. However, Chevron Corp is 1.65 times more volatile than American Century ETF. It trades about 0.19 of its potential returns per unit of risk. American Century ETF is currently generating about 0.11 per unit of risk. If you would invest  14,128  in Chevron Corp on December 20, 2024 and sell it today you would earn a total of  2,277  from holding Chevron Corp or generate 16.12% 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.  American Century ETF

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.

American Century ETF

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Century ETF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable essential indicators, American Century is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Chevron Corp and American Century

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

The idea behind Chevron Corp and American Century 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.