Correlation Between United States and Chevron Corp

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

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

Diversification Opportunities for United States and Chevron Corp

0.48

Correlation Coefficient

United States  Chevron Corp

Very weak diversification

The 3 months correlation between United and Chevron is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Chevron Corp CEDEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp CEDEAR and United States 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 United States Steel 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 CEDEAR has no effect on the direction of United States i.e., United States and Chevron Corp go up and down completely randomly.

Pair Corralation between United States and Chevron Corp

Given the investment horizon of 90 days United States Steel is expected to under-perform the Chevron Corp. In addition to that, United States is 2.01 times more volatile than Chevron Corp CEDEAR. It trades about -0.11 of its total potential returns per unit of risk. Chevron Corp CEDEAR is currently generating about -0.04 per unit of volatility. If you would invest  1,102,500  in Chevron Corp CEDEAR on September 15, 2024 and sell it today you would lose (52,500) from holding Chevron Corp CEDEAR or give up 4.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

United States Steel  vs.  Chevron Corp CEDEAR

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Chevron Corp CEDEAR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with United States and Chevron Corp

The main advantage of trading using opposite United States and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Steel and Chevron Corp CEDEAR 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.