Correlation Between Chevron Corp and Electric Power
Can any of the company-specific risk be diversified away by investing in both Chevron Corp and Electric Power 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 Electric Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and Electric Power Development, you can compare the effects of market volatilities on Chevron Corp and Electric Power 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 Electric Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Electric Power.
Diversification Opportunities for Chevron Corp and Electric Power
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chevron and Electric is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Electric Power Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electric Power Devel 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 Electric Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electric Power Devel has no effect on the direction of Chevron Corp i.e., Chevron Corp and Electric Power go up and down completely randomly.
Pair Corralation between Chevron Corp and Electric Power
Considering the 90-day investment horizon Chevron Corp is expected to generate 1.06 times more return on investment than Electric Power. However, Chevron Corp is 1.06 times more volatile than Electric Power Development. It trades about 0.17 of its potential returns per unit of risk. Electric Power Development is currently generating about 0.04 per unit of risk. If you would invest 14,320 in Chevron Corp on September 2, 2024 and sell it today you would earn a total of 1,873 from holding Chevron Corp or generate 13.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chevron Corp vs. Electric Power Development
Performance |
| Timeline |
| Chevron Corp |
| Electric Power Devel |
Chevron Corp and Electric Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chevron Corp and Electric Power
The main advantage of trading using opposite Chevron Corp and Electric Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, Electric Power 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 Electric Power will offset losses from the drop in Electric Power's long position.| Chevron Corp vs. BP PLC ADR | Chevron Corp vs. Shell PLC ADR | Chevron Corp vs. Petroleo Brasileiro Petrobras | Chevron Corp vs. Suncor Energy |
| Electric Power vs. Orsted AS | Electric Power vs. Innergex Renewable Energy | Electric Power vs. Clearway Energy | Electric Power vs. Fusion Fuel Green |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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