Correlation Between Chevron Corp and Sovos Brands

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

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

Diversification Opportunities for Chevron Corp and Sovos Brands

0.75

Correlation Coefficient

Chevron Corp  Sovos Brands

Poor diversification

The 3 months correlation between Chevron and Sovos is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Sovos Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovos Brands 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 Sovos Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovos Brands has no effect on the direction of Chevron Corp i.e., Chevron Corp and Sovos Brands go up and down completely randomly.

Pair Corralation between Chevron Corp and Sovos Brands

Considering the 90-day investment horizon Chevron Corp is expected to under-perform the Sovos Brands. But the stock apears to be less risky and, when comparing its historical volatility, Chevron Corp is 1.58 times less risky than Sovos Brands. The stock trades about -0.01 of its potential returns per unit of risk. The Sovos Brands is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,402  in Sovos Brands on September 19, 2024 and sell it today you would earn a total of  460.00  from holding Sovos Brands or generate 32.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	28.63%
Values	Daily Returns

Chevron Corp  vs.  Sovos Brands

Chevron Corp

Risk-Adjusted Performance

0 of 100

Insignificant

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Sovos Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sovos Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Sovos Brands is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Chevron Corp and Sovos Brands

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

The idea behind Chevron Corp and Sovos Brands 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.