Correlation Between NVIDIA and Chevron Corp

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

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

Diversification Opportunities for NVIDIA and Chevron Corp

0.29

Correlation Coefficient

NVIDIA  Chevron Corp

Modest diversification

The 3 months correlation between NVIDIA and Chevron is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp and NVIDIA 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 NVIDIA 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 NVIDIA i.e., NVIDIA and Chevron Corp go up and down completely randomly.

Pair Corralation between NVIDIA and Chevron Corp

Given the investment horizon of 90 days NVIDIA is expected to generate 4.22 times less return on investment than Chevron Corp. In addition to that, NVIDIA is 3.94 times more volatile than Chevron Corp. It trades about 0.05 of its total potential returns per unit of risk. Chevron Corp is currently generating about 0.91 per unit of volatility. If you would invest  14,285  in Chevron Corp on October 21, 2024 and sell it today you would earn a total of  1,862  from holding Chevron Corp or generate 13.03% return on investment over 90 days.

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

NVIDIA  vs.  Chevron Corp

NVIDIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NVIDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, NVIDIA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with NVIDIA and Chevron Corp

The main advantage of trading using opposite NVIDIA and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA 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 NVIDIA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..