Correlation Between Chevron Corp and Solitron Devices

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

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

Diversification Opportunities for Chevron Corp and Solitron Devices

0.19

Correlation Coefficient

Chevron Corp  Solitron Devices

Average diversification

The 3 months correlation between Chevron and Solitron is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Solitron Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solitron Devices 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 Solitron Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solitron Devices has no effect on the direction of Chevron Corp i.e., Chevron Corp and Solitron Devices go up and down completely randomly.

Pair Corralation between Chevron Corp and Solitron Devices

Considering the 90-day investment horizon Chevron Corp is expected to under-perform the Solitron Devices. But the stock apears to be less risky and, when comparing its historical volatility, Chevron Corp is 1.95 times less risky than Solitron Devices. The stock trades about -0.01 of its potential returns per unit of risk. The Solitron Devices is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,599  in Solitron Devices on December 2, 2024 and sell it today you would lose (8.00) from holding Solitron Devices or give up 0.5% of portfolio value over 90 days.

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

Chevron Corp  vs.  Solitron Devices

Chevron Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chevron Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chevron Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Solitron Devices

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solitron Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Solitron Devices is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Chevron Corp and Solitron Devices

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

The idea behind Chevron Corp and Solitron Devices 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.