Correlation Between Chevron Corp and APACHE

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

By analyzing existing cross correlation between Chevron Corp and APACHE P 6, you can compare the effects of market volatilities on Chevron Corp and APACHE 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 APACHE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and APACHE.

Diversification Opportunities for Chevron Corp and APACHE

-0.34

Correlation Coefficient

Chevron Corp  APACHE

Very good diversification

The 3 months correlation between Chevron and APACHE is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and APACHE P 6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APACHE P 6 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 APACHE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APACHE P 6 has no effect on the direction of Chevron Corp i.e., Chevron Corp and APACHE go up and down completely randomly.

Pair Corralation between Chevron Corp and APACHE

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.13 times more return on investment than APACHE. However, Chevron Corp is 1.13 times more volatile than APACHE P 6. It trades about 0.07 of its potential returns per unit of risk. APACHE P 6 is currently generating about -0.08 per unit of risk. If you would invest  14,251  in Chevron Corp on September 18, 2024 and sell it today you would earn a total of  685.00  from holding Chevron Corp or generate 4.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	84.13%
Values	Daily Returns

Chevron Corp  vs.  APACHE P 6

Chevron Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

APACHE P 6

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APACHE P 6 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, APACHE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chevron Corp and APACHE

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

The idea behind Chevron Corp and APACHE P 6 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.