Correlation Between Chevron Corp and INGERSOLL

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

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

Diversification Opportunities for Chevron Corp and INGERSOLL

-0.75

Correlation Coefficient

Chevron Corp  INGERSOLL

Pay attention - limited upside

The 3 months correlation between Chevron and INGERSOLL is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and INGERSOLL RAND GLOBAL HLDG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INGERSOLL RAND GLOBAL 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 INGERSOLL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INGERSOLL RAND GLOBAL has no effect on the direction of Chevron Corp i.e., Chevron Corp and INGERSOLL go up and down completely randomly.

Pair Corralation between Chevron Corp and INGERSOLL

Considering the 90-day investment horizon Chevron Corp is expected to under-perform the INGERSOLL. In addition to that, Chevron Corp is 5.72 times more volatile than INGERSOLL RAND GLOBAL HLDG. It trades about -0.33 of its total potential returns per unit of risk. INGERSOLL RAND GLOBAL HLDG is currently generating about -0.04 per unit of volatility. If you would invest  9,689  in INGERSOLL RAND GLOBAL HLDG on September 18, 2024 and sell it today you would lose (16.00) from holding INGERSOLL RAND GLOBAL HLDG or give up 0.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

Chevron Corp  vs.  INGERSOLL RAND GLOBAL HLDG

Chevron Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 4 (%) 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.

INGERSOLL RAND GLOBAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INGERSOLL RAND GLOBAL HLDG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, INGERSOLL 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 INGERSOLL

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

The idea behind Chevron Corp and INGERSOLL RAND GLOBAL HLDG 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.