Correlation Between Chevron Corp and FlexShares Global

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

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

Diversification Opportunities for Chevron Corp and FlexShares Global

0.5

Correlation Coefficient

Chevron Corp  FlexShares Global

Very weak diversification

The 3 months correlation between Chevron and FlexShares is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and FlexShares Global Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Global Quality 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 FlexShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Global Quality has no effect on the direction of Chevron Corp i.e., Chevron Corp and FlexShares Global go up and down completely randomly.

Pair Corralation between Chevron Corp and FlexShares Global

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.1 times less return on investment than FlexShares Global. In addition to that, Chevron Corp is 1.38 times more volatile than FlexShares Global Quality. It trades about 0.03 of its total potential returns per unit of risk. FlexShares Global Quality is currently generating about 0.04 per unit of volatility. If you would invest  5,299  in FlexShares Global Quality on October 7, 2024 and sell it today you would earn a total of  417.00  from holding FlexShares Global Quality or generate 7.87% return on investment over 90 days.

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

Chevron Corp  vs.  FlexShares Global Quality

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

FlexShares Global Quality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FlexShares Global Quality has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, FlexShares Global is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Chevron Corp and FlexShares Global

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

The idea behind Chevron Corp and FlexShares Global Quality 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..