Correlation Between Chevron Corp and SOUTHERN

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

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

Diversification Opportunities for Chevron Corp and SOUTHERN

0.63

Correlation Coefficient

Chevron Corp  SOUTHERN

Poor diversification

The 3 months correlation between Chevron and SOUTHERN is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and SOUTHERN PER CORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUTHERN PER P 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 SOUTHERN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOUTHERN PER P has no effect on the direction of Chevron Corp i.e., Chevron Corp and SOUTHERN go up and down completely randomly.

Pair Corralation between Chevron Corp and SOUTHERN

Considering the 90-day investment horizon Chevron Corp is expected to generate 3.07 times more return on investment than SOUTHERN. However, Chevron Corp is 3.07 times more volatile than SOUTHERN PER CORP. It trades about 0.08 of its potential returns per unit of risk. SOUTHERN PER CORP is currently generating about 0.14 per unit of risk. If you would invest  15,146  in Chevron Corp on December 11, 2024 and sell it today you would earn a total of  611.00  from holding Chevron Corp or generate 4.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.56%
Values	Daily Returns

Chevron Corp  vs.  SOUTHERN PER CORP

Chevron Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 2 (%) 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.

SOUTHERN PER P

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Chevron Corp and SOUTHERN

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

The idea behind Chevron Corp and SOUTHERN PER CORP 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 Anywhere module to track or share privately all of your investments from the convenience of any device.