Correlation Between Teekay and Chevron Corp

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

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

Diversification Opportunities for Teekay and Chevron Corp

-0.02

Correlation Coefficient

Teekay  Chevron Corp

Good diversification

The 3 months correlation between Teekay and Chevron is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Teekay and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp and Teekay 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 Teekay 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 Teekay i.e., Teekay and Chevron Corp go up and down completely randomly.

Pair Corralation between Teekay and Chevron Corp

Allowing for the 90-day total investment horizon Teekay is expected to under-perform the Chevron Corp. In addition to that, Teekay is 1.69 times more volatile than Chevron Corp. It trades about -0.01 of its total potential returns per unit of risk. Chevron Corp is currently generating about 0.21 per unit of volatility. If you would invest  14,150  in Chevron Corp on December 28, 2024 and sell it today you would earn a total of  2,515  from holding Chevron Corp or generate 17.77% return on investment over 90 days.

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

Teekay  vs.  Chevron Corp

Teekay

Risk-Adjusted Performance

Very Weak

Over the last 90 days Teekay has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Teekay is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Chevron Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 16 (%) 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 Teekay and Chevron Corp

The main advantage of trading using opposite Teekay and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teekay 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 Teekay 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.