Correlation Between Chevron and China Petroleum
Can any of the company-specific risk be diversified away by investing in both Chevron and China Petroleum 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 China Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron and China Petroleum Chemical, you can compare the effects of market volatilities on Chevron and China Petroleum 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 China Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron and China Petroleum.
Diversification Opportunities for Chevron and China Petroleum
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Chevron and China is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Chevron and China Petroleum Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Petroleum Chemical 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 China Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Petroleum Chemical has no effect on the direction of Chevron i.e., Chevron and China Petroleum go up and down completely randomly.
Pair Corralation between Chevron and China Petroleum
Assuming the 90 days trading horizon Chevron is expected to generate 29.29 times less return on investment than China Petroleum. But when comparing it to its historical volatility, Chevron is 3.09 times less risky than China Petroleum. It trades about 0.01 of its potential returns per unit of risk. China Petroleum Chemical is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 10.00 in China Petroleum Chemical on September 3, 2024 and sell it today you would earn a total of 40.00 from holding China Petroleum Chemical or generate 400.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chevron vs. China Petroleum Chemical
Performance |
| Timeline |
| Chevron |
| China Petroleum Chemical |
Chevron and China Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chevron and China Petroleum
The main advantage of trading using opposite Chevron and China Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron position performs unexpectedly, China Petroleum 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 China Petroleum will offset losses from the drop in China Petroleum's long position.| Chevron vs. BII Railway Transportation | Chevron vs. SWISS WATER DECAFFCOFFEE | Chevron vs. Broadcom | Chevron vs. BROADSTNET LEADL 00025 |
| China Petroleum vs. GREENX METALS LTD | China Petroleum vs. Lion One Metals | China Petroleum vs. Webster Financial | China Petroleum vs. The Hanover Insurance |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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