Correlation Between DAIRY FARM and Chevron

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

By analyzing existing cross correlation between DAIRY FARM INTL and Chevron, you can compare the effects of market volatilities on DAIRY FARM and Chevron 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 DAIRY FARM with a short position of Chevron. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAIRY FARM and Chevron.

Diversification Opportunities for DAIRY FARM and Chevron

0.24

Correlation Coefficient

DAIRY FARM  Chevron

Modest diversification

The 3 months correlation between DAIRY and Chevron is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL and Chevron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron and DAIRY FARM 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 DAIRY FARM INTL are associated (or correlated) with Chevron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron has no effect on the direction of DAIRY FARM i.e., DAIRY FARM and Chevron go up and down completely randomly.

Pair Corralation between DAIRY FARM and Chevron

Assuming the 90 days trading horizon DAIRY FARM INTL is expected to under-perform the Chevron. In addition to that, DAIRY FARM is 1.39 times more volatile than Chevron. It trades about -0.01 of its total potential returns per unit of risk. Chevron is currently generating about 0.11 per unit of volatility. If you would invest  13,717  in Chevron on December 24, 2024 and sell it today you would earn a total of  1,397  from holding Chevron or generate 10.18% return on investment over 90 days.

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

DAIRY FARM INTL  vs.  Chevron

DAIRY FARM INTL

Risk-Adjusted Performance

Very Weak

Over the last 90 days DAIRY FARM INTL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, DAIRY FARM is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Chevron

Risk-Adjusted Performance

OK

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

Pair Trading with DAIRY FARM and Chevron

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

The idea behind DAIRY FARM INTL and Chevron 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.