Correlation Between Hilton Worldwide and Chevron Corp

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

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

Diversification Opportunities for Hilton Worldwide and Chevron Corp

0.93

Correlation Coefficient

Hilton Worldwide  Chevron Corp

Almost no diversification

The 3 months correlation between Hilton and Chevron is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Worldwide Holdings and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp and Hilton Worldwide 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 Hilton Worldwide Holdings are associated (or correlated) with Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of Hilton Worldwide i.e., Hilton Worldwide and Chevron Corp go up and down completely randomly.

Pair Corralation between Hilton Worldwide and Chevron Corp

Considering the 90-day investment horizon Hilton Worldwide Holdings is expected to generate 0.96 times more return on investment than Chevron Corp. However, Hilton Worldwide Holdings is 1.04 times less risky than Chevron Corp. It trades about 0.13 of its potential returns per unit of risk. Chevron Corp is currently generating about 0.02 per unit of risk. If you would invest  14,859  in Hilton Worldwide Holdings on September 12, 2024 and sell it today you would earn a total of  10,513  from holding Hilton Worldwide Holdings or generate 70.75% return on investment over 90 days.

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

Hilton Worldwide Holdings  vs.  Chevron Corp

Hilton Worldwide Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Worldwide Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent essential indicators, Hilton Worldwide unveiled solid returns over the last few months and may actually be approaching a breakup point.

Chevron Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Chevron Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hilton Worldwide and Chevron Corp

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

The idea behind Hilton Worldwide Holdings and Chevron 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.