Correlation Between Chevron Corp and CHURCH

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

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

Diversification Opportunities for Chevron Corp and CHURCH

-0.56

Correlation Coefficient

Chevron Corp  CHURCH

Excellent diversification

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

Pair Corralation between Chevron Corp and CHURCH

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.19 times less return on investment than CHURCH. But when comparing it to its historical volatility, Chevron Corp is 1.03 times less risky than CHURCH. It trades about 0.2 of its potential returns per unit of risk. CHURCH DWIGHT INC is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  7,709  in CHURCH DWIGHT INC on December 22, 2024 and sell it today you would earn a total of  524.00  from holding CHURCH DWIGHT INC or generate 6.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	36.07%
Values	Daily Returns

Chevron Corp  vs.  CHURCH DWIGHT INC

Chevron Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Chevron Corp showed solid returns over the last few months and may actually be approaching a breakup point.

CHURCH DWIGHT INC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CHURCH DWIGHT INC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, CHURCH sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chevron Corp and CHURCH

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

The idea behind Chevron Corp and CHURCH DWIGHT 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.