Correlation Between Chevron Corp and WisdomTree Multifactor

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

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

Diversification Opportunities for Chevron Corp and WisdomTree Multifactor

0.6

Correlation Coefficient

Chevron Corp  WisdomTree Multifactor

Poor diversification

The 3 months correlation between Chevron and WisdomTree is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and WisdomTree Multifactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Multifactor 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 WisdomTree Multifactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Multifactor has no effect on the direction of Chevron Corp i.e., Chevron Corp and WisdomTree Multifactor go up and down completely randomly.

Pair Corralation between Chevron Corp and WisdomTree Multifactor

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.54 times more return on investment than WisdomTree Multifactor. However, Chevron Corp is 1.54 times more volatile than WisdomTree Multifactor. It trades about 0.11 of its potential returns per unit of risk. WisdomTree Multifactor is currently generating about 0.05 per unit of risk. If you would invest  14,936  in Chevron Corp on October 20, 2024 and sell it today you would earn a total of  1,211  from holding Chevron Corp or generate 8.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Chevron Corp  vs.  WisdomTree Multifactor

Chevron Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

WisdomTree Multifactor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Multifactor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, WisdomTree Multifactor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Chevron Corp and WisdomTree Multifactor

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

The idea behind Chevron Corp and WisdomTree Multifactor 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.