Correlation Between Chevron and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Chevron and Summit Materials 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 Chevron and Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron and Summit Materials, you can compare the effects of market volatilities on Chevron and Summit Materials 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 Chevron with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron and Summit Materials.
Diversification Opportunities for Chevron and Summit Materials
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chevron and Summit is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Chevron and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Chevron 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 Chevron are associated (or correlated) with Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Chevron i.e., Chevron and Summit Materials go up and down completely randomly.
Pair Corralation between Chevron and Summit Materials
Assuming the 90 days trading horizon Chevron is expected to generate 1.17 times more return on investment than Summit Materials. However, Chevron is 1.17 times more volatile than Summit Materials. It trades about 0.64 of its potential returns per unit of risk. Summit Materials is currently generating about 0.16 per unit of risk. If you would invest 13,692 in Chevron on October 23, 2024 and sell it today you would earn a total of 1,988 from holding Chevron or generate 14.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chevron vs. Summit Materials
Performance |
| Timeline |
| Chevron |
| Summit Materials |
Chevron and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chevron and Summit Materials
The main advantage of trading using opposite Chevron and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron position performs unexpectedly, Summit Materials 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 Summit Materials will offset losses from the drop in Summit Materials' long position.| Chevron vs. Summit Materials | Chevron vs. SEI INVESTMENTS | Chevron vs. JLF INVESTMENT | Chevron vs. Gladstone Investment |
| Summit Materials vs. WisdomTree Investments | Summit Materials vs. Apollo Investment Corp | Summit Materials vs. PennantPark Investment | Summit Materials vs. Virtus Investment Partners |
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 CEOs Directory module to screen CEOs from public companies around the world.
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