Correlation Between Chevron Corp and Yorktown Small

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

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

Diversification Opportunities for Chevron Corp and Yorktown Small

0.79

Correlation Coefficient

Chevron Corp  Yorktown Small

Poor diversification

The 3 months correlation between Chevron and Yorktown is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Yorktown Small Cap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yorktown Small Cap 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 Yorktown Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yorktown Small Cap has no effect on the direction of Chevron Corp i.e., Chevron Corp and Yorktown Small go up and down completely randomly.

Pair Corralation between Chevron Corp and Yorktown Small

Considering the 90-day investment horizon Chevron Corp is expected to under-perform the Yorktown Small. But the stock apears to be less risky and, when comparing its historical volatility, Chevron Corp is 1.04 times less risky than Yorktown Small. The stock trades about -0.27 of its potential returns per unit of risk. The Yorktown Small Cap Fund is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest  1,703  in Yorktown Small Cap Fund on October 9, 2024 and sell it today you would lose (84.00) from holding Yorktown Small Cap Fund or give up 4.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Chevron Corp  vs.  Yorktown Small Cap Fund

Chevron Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chevron Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Yorktown Small Cap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yorktown Small Cap Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Yorktown Small 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 Yorktown Small

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

The idea behind Chevron Corp and Yorktown Small Cap Fund 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.