Correlation Between Chevron Corp and Sino Biopharmaceutica

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

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

Diversification Opportunities for Chevron Corp and Sino Biopharmaceutica

0.69

Correlation Coefficient

Chevron Corp  Sino Biopharmaceutica

Poor diversification

The 3 months correlation between Chevron and Sino is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Sino Biopharmaceutical Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sino Biopharmaceutical 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 Sino Biopharmaceutica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sino Biopharmaceutical has no effect on the direction of Chevron Corp i.e., Chevron Corp and Sino Biopharmaceutica go up and down completely randomly.

Pair Corralation between Chevron Corp and Sino Biopharmaceutica

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.11 times less return on investment than Sino Biopharmaceutica. But when comparing it to its historical volatility, Chevron Corp is 2.32 times less risky than Sino Biopharmaceutica. It trades about 0.18 of its potential returns per unit of risk. Sino Biopharmaceutical Ltd is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  800.00  in Sino Biopharmaceutical Ltd on September 12, 2024 and sell it today you would earn a total of  105.00  from holding Sino Biopharmaceutical Ltd or generate 13.13% 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.  Sino Biopharmaceutical Ltd

Chevron Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 13 (%) 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.

Sino Biopharmaceutical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sino Biopharmaceutical Ltd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain primary indicators, Sino Biopharmaceutica showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chevron Corp and Sino Biopharmaceutica

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

The idea behind Chevron Corp and Sino Biopharmaceutical Ltd 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.