Correlation Between Chevron Corp and DISCOVERY

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

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

Diversification Opportunities for Chevron Corp and DISCOVERY

-0.44

Correlation Coefficient

Chevron Corp  DISCOVERY

Very good diversification

The 3 months correlation between Chevron and DISCOVERY is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and DISCOVERY MUNICATIONS LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DISCOVERY MUNICATIONS LLC 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 DISCOVERY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DISCOVERY MUNICATIONS LLC has no effect on the direction of Chevron Corp i.e., Chevron Corp and DISCOVERY go up and down completely randomly.

Pair Corralation between Chevron Corp and DISCOVERY

Considering the 90-day investment horizon Chevron Corp is expected to generate 2.83 times less return on investment than DISCOVERY. But when comparing it to its historical volatility, Chevron Corp is 1.44 times less risky than DISCOVERY. It trades about 0.02 of its potential returns per unit of risk. DISCOVERY MUNICATIONS LLC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,866  in DISCOVERY MUNICATIONS LLC on December 4, 2024 and sell it today you would earn a total of  121.00  from holding DISCOVERY MUNICATIONS LLC or generate 1.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	37.29%
Values	Daily Returns

Chevron Corp  vs.  DISCOVERY MUNICATIONS LLC

Chevron Corp

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 1 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

DISCOVERY MUNICATIONS LLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DISCOVERY MUNICATIONS LLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DISCOVERY is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chevron Corp and DISCOVERY

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

The idea behind Chevron Corp and DISCOVERY MUNICATIONS LLC 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.