Correlation Between Chevron Corp and VanEck Indonesia

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

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

Diversification Opportunities for Chevron Corp and VanEck Indonesia

-0.64

Correlation Coefficient

Chevron Corp  VanEck Indonesia

Excellent diversification

The 3 months correlation between Chevron and VanEck is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and VanEck Indonesia Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Indonesia Index 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 VanEck Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Indonesia Index has no effect on the direction of Chevron Corp i.e., Chevron Corp and VanEck Indonesia go up and down completely randomly.

Pair Corralation between Chevron Corp and VanEck Indonesia

Considering the 90-day investment horizon Chevron Corp is expected to generate 0.74 times more return on investment than VanEck Indonesia. However, Chevron Corp is 1.35 times less risky than VanEck Indonesia. It trades about 0.2 of its potential returns per unit of risk. VanEck Indonesia Index is currently generating about -0.13 per unit of risk. If you would invest  14,242  in Chevron Corp on December 27, 2024 and sell it today you would earn a total of  2,423  from holding Chevron Corp or generate 17.01% return on investment over 90 days.

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

Chevron Corp  vs.  VanEck Indonesia Index

Chevron Corp

Risk-Adjusted Performance

Solid

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.

VanEck Indonesia Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Indonesia Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Etf's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with Chevron Corp and VanEck Indonesia

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

The idea behind Chevron Corp and VanEck Indonesia Index 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.