Correlation Between Chevron Corp and Strategic Env

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

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

Diversification Opportunities for Chevron Corp and Strategic Env

-0.34

Correlation Coefficient

Chevron Corp  Strategic Env

Very good diversification

The 3 months correlation between Chevron and Strategic is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Strategic Env Egy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Env Egy 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 Strategic Env. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Env Egy has no effect on the direction of Chevron Corp i.e., Chevron Corp and Strategic Env go up and down completely randomly.

Pair Corralation between Chevron Corp and Strategic Env

Considering the 90-day investment horizon Chevron Corp is expected to under-perform the Strategic Env. But the stock apears to be less risky and, when comparing its historical volatility, Chevron Corp is 17.9 times less risky than Strategic Env. The stock trades about -0.17 of its potential returns per unit of risk. The Strategic Env Egy is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Strategic Env Egy on September 16, 2024 and sell it today you would earn a total of  1.00  from holding Strategic Env Egy or generate 16.67% return on investment over 90 days.

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

Chevron Corp  vs.  Strategic Env Egy

Chevron Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 9 (%) 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.

Strategic Env Egy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Env Egy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Strategic Env reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chevron Corp and Strategic Env

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

The idea behind Chevron Corp and Strategic Env Egy 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.