Correlation Between Chevron Corp and Tele2 AB

Can any of the company-specific risk be diversified away by investing in both Chevron Corp and Tele2 AB 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 Tele2 AB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chevron Corp and Tele2 AB, you can compare the effects of market volatilities on Chevron Corp and Tele2 AB 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 Tele2 AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Tele2 AB.

Diversification Opportunities for Chevron Corp and Tele2 AB

0.52

Correlation Coefficient

Chevron Corp  Tele2 AB

Very weak diversification

The 3 months correlation between Chevron and Tele2 is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Tele2 AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tele2 AB 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 Tele2 AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tele2 AB has no effect on the direction of Chevron Corp i.e., Chevron Corp and Tele2 AB go up and down completely randomly.

Pair Corralation between Chevron Corp and Tele2 AB

Considering the 90-day investment horizon Chevron Corp is expected to under-perform the Tele2 AB. But the stock apears to be less risky and, when comparing its historical volatility, Chevron Corp is 1.35 times less risky than Tele2 AB. The stock trades about 0.0 of its potential returns per unit of risk. The Tele2 AB is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  524.00  in Tele2 AB on November 28, 2024 and sell it today you would earn a total of  71.00  from holding Tele2 AB or generate 13.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Chevron Corp  vs.  Tele2 AB

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.

Tele2 AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tele2 AB are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Tele2 AB showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chevron Corp and Tele2 AB

The main advantage of trading using opposite Chevron Corp and Tele2 AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, Tele2 AB 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 Tele2 AB will offset losses from the drop in Tele2 AB's long position.

The idea behind Chevron Corp and Tele2 AB 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.