Correlation Between Chevron Corp and SPDR DoubleLine

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

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

Diversification Opportunities for Chevron Corp and SPDR DoubleLine

-0.78

Correlation Coefficient

Chevron Corp  SPDR DoubleLine

Pay attention - limited upside

The 3 months correlation between Chevron and SPDR is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and SPDR DoubleLine Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR DoubleLine Total 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 SPDR DoubleLine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR DoubleLine Total has no effect on the direction of Chevron Corp i.e., Chevron Corp and SPDR DoubleLine go up and down completely randomly.

Pair Corralation between Chevron Corp and SPDR DoubleLine

Considering the 90-day investment horizon Chevron Corp is expected to generate 3.89 times more return on investment than SPDR DoubleLine. However, Chevron Corp is 3.89 times more volatile than SPDR DoubleLine Total. It trades about 0.18 of its potential returns per unit of risk. SPDR DoubleLine Total is currently generating about -0.03 per unit of risk. If you would invest  14,320  in Chevron Corp on September 3, 2024 and sell it today you would earn a total of  1,901  from holding Chevron Corp or generate 13.28% return on investment over 90 days.

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

Chevron Corp  vs.  SPDR DoubleLine Total

Chevron Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Chevron Corp showed solid returns over the last few months and may actually be approaching a breakup point.

SPDR DoubleLine Total

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR DoubleLine Total has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, SPDR DoubleLine is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Chevron Corp and SPDR DoubleLine

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

The idea behind Chevron Corp and SPDR DoubleLine Total 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.