Correlation Between Treasury Wine and Chevron

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

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

Diversification Opportunities for Treasury Wine and Chevron

0.09

Correlation Coefficient

Treasury Wine  Chevron

Significant diversification

The 3 months correlation between Treasury and Chevron is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and Chevron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron and Treasury Wine 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 Treasury Wine Estates 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 Treasury Wine i.e., Treasury Wine and Chevron go up and down completely randomly.

Pair Corralation between Treasury Wine and Chevron

Assuming the 90 days horizon Treasury Wine Estates is expected to under-perform the Chevron. In addition to that, Treasury Wine is 1.31 times more volatile than Chevron. It trades about -0.02 of its total potential returns per unit of risk. Chevron is currently generating about 0.01 per unit of volatility. If you would invest  14,486  in Chevron on October 26, 2024 and sell it today you would earn a total of  338.00  from holding Chevron or generate 2.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Treasury Wine Estates  vs.  Chevron

Treasury Wine Estates

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Treasury Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Chevron

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Chevron may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Treasury Wine and Chevron

The main advantage of trading using opposite Treasury Wine and Chevron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treasury Wine 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 Treasury Wine Estates 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.