Correlation Between Chevron Corp and CARDINAL

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

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

Diversification Opportunities for Chevron Corp and CARDINAL

0.1

Correlation Coefficient

Chevron Corp  CARDINAL

Average diversification

The 3 months correlation between Chevron and CARDINAL is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and CARDINAL HEALTH INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARDINAL HEALTH INC 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 CARDINAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARDINAL HEALTH INC has no effect on the direction of Chevron Corp i.e., Chevron Corp and CARDINAL go up and down completely randomly.

Pair Corralation between Chevron Corp and CARDINAL

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.61 times less return on investment than CARDINAL. In addition to that, Chevron Corp is 1.19 times more volatile than CARDINAL HEALTH INC. It trades about 0.01 of its total potential returns per unit of risk. CARDINAL HEALTH INC is currently generating about 0.03 per unit of volatility. If you would invest  7,822  in CARDINAL HEALTH INC on December 2, 2024 and sell it today you would earn a total of  427.00  from holding CARDINAL HEALTH INC or generate 5.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	67.57%
Values	Daily Returns

Chevron Corp  vs.  CARDINAL HEALTH INC

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.

CARDINAL HEALTH INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days CARDINAL HEALTH INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CARDINAL 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 CARDINAL

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

The idea behind Chevron Corp and CARDINAL HEALTH INC 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.