Correlation Between AUTONATION and Chevron Corp

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

By analyzing existing cross correlation between AUTONATION INC 38 and Chevron Corp, you can compare the effects of market volatilities on AUTONATION 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 AUTONATION with a short position of Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUTONATION and Chevron Corp.

Diversification Opportunities for AUTONATION and Chevron Corp

0.03

Correlation Coefficient

AUTONATION  Chevron Corp

Significant diversification

The 3 months correlation between AUTONATION and Chevron is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding AUTONATION INC 38 and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp and AUTONATION 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 AUTONATION INC 38 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 AUTONATION i.e., AUTONATION and Chevron Corp go up and down completely randomly.

Pair Corralation between AUTONATION and Chevron Corp

Assuming the 90 days trading horizon AUTONATION is expected to generate 13.68 times less return on investment than Chevron Corp. But when comparing it to its historical volatility, AUTONATION INC 38 is 1.89 times less risky than Chevron Corp. It trades about 0.01 of its potential returns per unit of risk. Chevron Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  14,298  in Chevron Corp on October 22, 2024 and sell it today you would earn a total of  1,849  from holding Chevron Corp or generate 12.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.94%
Values	Daily Returns

AUTONATION INC 38  vs.  Chevron Corp

AUTONATION INC 38

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AUTONATION INC 38 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AUTONATION is not utilizing all of its potentials. The newest 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 fragile basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with AUTONATION and Chevron Corp

The main advantage of trading using opposite AUTONATION and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AUTONATION 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 AUTONATION INC 38 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.