Correlation Between Chevron Corp and Thales SA

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

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

Diversification Opportunities for Chevron Corp and Thales SA

-0.44

Correlation Coefficient

Chevron Corp  Thales SA

Very good diversification

The 3 months correlation between Chevron and Thales is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Thales SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thales SA ADR 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 Thales SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thales SA ADR has no effect on the direction of Chevron Corp i.e., Chevron Corp and Thales SA go up and down completely randomly.

Pair Corralation between Chevron Corp and Thales SA

Considering the 90-day investment horizon Chevron Corp is expected to generate 0.69 times more return on investment than Thales SA. However, Chevron Corp is 1.45 times less risky than Thales SA. It trades about 0.16 of its potential returns per unit of risk. Thales SA ADR is currently generating about -0.11 per unit of risk. If you would invest  13,919  in Chevron Corp on September 13, 2024 and sell it today you would earn a total of  1,702  from holding Chevron Corp or generate 12.23% return on investment over 90 days.

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

Chevron Corp  vs.  Thales SA ADR

Chevron Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 12 (%) 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.

Thales SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thales SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Chevron Corp and Thales SA

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

The idea behind Chevron Corp and Thales SA ADR 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.