Correlation Between Chevron Corp and China Medicine
Can any of the company-specific risk be diversified away by investing in both Chevron Corp and China Medicine 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 China Medicine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and China Medicine, you can compare the effects of market volatilities on Chevron Corp and China Medicine 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 China Medicine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and China Medicine.
Diversification Opportunities for Chevron Corp and China Medicine
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chevron and China is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and China Medicine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Medicine 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 China Medicine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Medicine has no effect on the direction of Chevron Corp i.e., Chevron Corp and China Medicine go up and down completely randomly.
Pair Corralation between Chevron Corp and China Medicine
If you would invest 15,242 in Chevron Corp on September 3, 2024 and sell it today you would earn a total of 951.00 from holding Chevron Corp or generate 6.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Chevron Corp vs. China Medicine
Performance |
| Timeline |
| Chevron Corp |
| China Medicine |
Chevron Corp and China Medicine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chevron Corp and China Medicine
The main advantage of trading using opposite Chevron Corp and China Medicine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, China Medicine 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 Medicine will offset losses from the drop in China Medicine's long position.The idea behind Chevron Corp and China Medicine 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.| China Medicine vs. Cardinal Health | China Medicine vs. Henry Schein | China Medicine vs. Owens Minor | China Medicine vs. Patterson Companies |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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