Correlation Between Chevron Corp and Industrial

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

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

Diversification Opportunities for Chevron Corp and Industrial

0.63

Correlation Coefficient

Chevron Corp  Industrial

Poor diversification

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

Pair Corralation between Chevron Corp and Industrial

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.3 times less return on investment than Industrial. But when comparing it to its historical volatility, Chevron Corp is 2.01 times less risky than Industrial. It trades about 0.2 of its potential returns per unit of risk. Industrial and Commercial is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  60.00  in Industrial and Commercial on December 30, 2024 and sell it today you would earn a total of  12.00  from holding Industrial and Commercial or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.55%
Values	Daily Returns

Chevron Corp  vs.  Industrial and Commercial

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.

Industrial and Commercial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Industrial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chevron Corp and Industrial

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

The idea behind Chevron Corp and Industrial and Commercial 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.