Correlation Between Chevron Corp and BECTON

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

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

Diversification Opportunities for Chevron Corp and BECTON

-0.56

Correlation Coefficient

Chevron Corp  BECTON

Excellent diversification

The 3 months correlation between Chevron and BECTON is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and BECTON DICKINSON AND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BECTON DICKINSON AND 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 BECTON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BECTON DICKINSON AND has no effect on the direction of Chevron Corp i.e., Chevron Corp and BECTON go up and down completely randomly.

Pair Corralation between Chevron Corp and BECTON

Considering the 90-day investment horizon Chevron Corp is expected to generate 482.48 times less return on investment than BECTON. But when comparing it to its historical volatility, Chevron Corp is 68.77 times less risky than BECTON. It trades about 0.01 of its potential returns per unit of risk. BECTON DICKINSON AND is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  8,265  in BECTON DICKINSON AND on September 2, 2024 and sell it today you would lose (592.00) from holding BECTON DICKINSON AND or give up 7.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	71.77%
Values	Daily Returns

Chevron Corp  vs.  BECTON DICKINSON AND

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 weak basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BECTON DICKINSON AND

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Chevron Corp and BECTON

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

The idea behind Chevron Corp and BECTON DICKINSON AND 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.