Correlation Between Air China and Chevron
Can any of the company-specific risk be diversified away by investing in both Air China 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 Air China and Chevron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air China Limited and Chevron, you can compare the effects of market volatilities on Air China 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 Air China with a short position of Chevron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and Chevron.
Diversification Opportunities for Air China and Chevron
Very good diversification
The 3 months correlation between Air and Chevron is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Air China Limited and Chevron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron and Air China 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 Air China Limited 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 Air China i.e., Air China and Chevron go up and down completely randomly.
Pair Corralation between Air China and Chevron
Assuming the 90 days horizon Air China Limited is expected to under-perform the Chevron. In addition to that, Air China is 2.45 times more volatile than Chevron. It trades about -0.06 of its total potential returns per unit of risk. Chevron is currently generating about 0.04 per unit of volatility. If you would invest 14,792 in Chevron on November 28, 2024 and sell it today you would earn a total of 132.00 from holding Chevron or generate 0.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Air China Limited vs. Chevron
Performance |
| Timeline |
| Air China Limited |
| Chevron |
Air China and Chevron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air China and Chevron
The main advantage of trading using opposite Air China and Chevron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air China 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.| Air China vs. Heidelberg Materials AG | Air China vs. Hyster Yale Materials Handling | Air China vs. Lamar Advertising | Air China vs. Vulcan Materials |
| Chevron vs. Genertec Universal Medical | Chevron vs. PULSION Medical Systems | Chevron vs. MeVis Medical Solutions | Chevron vs. IMAGIN MEDICAL INC |
Check out your portfolio center.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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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