Correlation Between Chevron Corp and Capital Group
Can any of the company-specific risk be diversified away by investing in both Chevron Corp and Capital Group 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 Corp and Capital Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and Capital Group Core, you can compare the effects of market volatilities on Chevron Corp and Capital Group 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 Corp with a short position of Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Capital Group.
Diversification Opportunities for Chevron Corp and Capital Group
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chevron and Capital is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Capital Group Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Core and Chevron Corp 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 Corp are associated (or correlated) with Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group Core has no effect on the direction of Chevron Corp i.e., Chevron Corp and Capital Group go up and down completely randomly.
Pair Corralation between Chevron Corp and Capital Group
Considering the 90-day investment horizon Chevron Corp is expected to generate 2.24 times more return on investment than Capital Group. However, Chevron Corp is 2.24 times more volatile than Capital Group Core. It trades about 0.39 of its potential returns per unit of risk. Capital Group Core is currently generating about 0.27 per unit of risk. If you would invest 14,732 in Chevron Corp on September 1, 2024 and sell it today you would earn a total of 1,461 from holding Chevron Corp or generate 9.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Chevron Corp vs. Capital Group Core
Performance |
| Timeline |
| Chevron Corp |
| Capital Group Core |
Chevron Corp and Capital Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chevron Corp and Capital Group
The main advantage of trading using opposite Chevron Corp and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, Capital Group 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 Capital Group will offset losses from the drop in Capital Group's long position.| Chevron Corp vs. Shell PLC ADR | Chevron Corp vs. BP PLC ADR | Chevron Corp vs. Suncor Energy | Chevron Corp vs. Equinor ASA ADR |
| Capital Group vs. EA Series Trust | Capital Group vs. Northern Lights | Capital Group vs. Northern Lights | Capital Group vs. Northern Lights |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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