Correlation Between COMMERCIAL VEHICLE and Chevron

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

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

Diversification Opportunities for COMMERCIAL VEHICLE and Chevron

-0.55

Correlation Coefficient

COMMERCIAL VEHICLE  Chevron

Excellent diversification

The 3 months correlation between COMMERCIAL and Chevron is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding COMMERCIAL VEHICLE and Chevron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE i.e., COMMERCIAL VEHICLE and Chevron go up and down completely randomly.

Pair Corralation between COMMERCIAL VEHICLE and Chevron

Assuming the 90 days trading horizon COMMERCIAL VEHICLE is expected to under-perform the Chevron. In addition to that, COMMERCIAL VEHICLE is 2.4 times more volatile than Chevron. It trades about -0.05 of its total potential returns per unit of risk. Chevron is currently generating about 0.0 per unit of volatility. If you would invest  15,268  in Chevron on October 9, 2024 and sell it today you would lose (906.00) from holding Chevron or give up 5.93% of portfolio value over 90 days.

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

COMMERCIAL VEHICLE  vs.  Chevron

COMMERCIAL VEHICLE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COMMERCIAL VEHICLE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Chevron

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Chevron may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with COMMERCIAL VEHICLE and Chevron

The main advantage of trading using opposite COMMERCIAL VEHICLE and Chevron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..