Correlation Between Chevron Corp and ProShares Online

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

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

Diversification Opportunities for Chevron Corp and ProShares Online

0.66

Correlation Coefficient

Chevron Corp  ProShares Online

Poor diversification

The 3 months correlation between Chevron and ProShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and ProShares Online Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Online Retail 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 ProShares Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Online Retail has no effect on the direction of Chevron Corp i.e., Chevron Corp and ProShares Online go up and down completely randomly.

Pair Corralation between Chevron Corp and ProShares Online

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.54 times less return on investment than ProShares Online. But when comparing it to its historical volatility, Chevron Corp is 1.09 times less risky than ProShares Online. It trades about 0.14 of its potential returns per unit of risk. ProShares Online Retail is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  4,131  in ProShares Online Retail on September 14, 2024 and sell it today you would earn a total of  660.00  from holding ProShares Online Retail or generate 15.98% 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.  ProShares Online Retail

Chevron Corp

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ProShares Online Retail

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Online Retail are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, ProShares Online displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chevron Corp and ProShares Online

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

The idea behind Chevron Corp and ProShares Online Retail 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.