Correlation Between Chevron Corp and Equinor ASA
Can any of the company-specific risk be diversified away by investing in both Chevron Corp and Equinor ASA 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 Equinor ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and Equinor ASA ADR, you can compare the effects of market volatilities on Chevron Corp and Equinor ASA 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 Equinor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Equinor ASA.
Diversification Opportunities for Chevron Corp and Equinor ASA
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Chevron and Equinor is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Equinor ASA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA ADR 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 Equinor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinor ASA ADR has no effect on the direction of Chevron Corp i.e., Chevron Corp and Equinor ASA go up and down completely randomly.
Pair Corralation between Chevron Corp and Equinor ASA
Considering the 90-day investment horizon Chevron Corp is expected to generate 0.7 times more return on investment than Equinor ASA. However, Chevron Corp is 1.44 times less risky than Equinor ASA. It trades about 0.05 of its potential returns per unit of risk. Equinor ASA ADR is currently generating about -0.03 per unit of risk. If you would invest 13,947 in Chevron Corp on September 1, 2024 and sell it today you would earn a total of 2,246 from holding Chevron Corp or generate 16.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chevron Corp vs. Equinor ASA ADR
Performance |
| Timeline |
| Chevron Corp |
| Equinor ASA ADR |
Chevron Corp and Equinor ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chevron Corp and Equinor ASA
The main advantage of trading using opposite Chevron Corp and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, Equinor ASA 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 Equinor ASA will offset losses from the drop in Equinor ASA's long position.| Chevron Corp vs. Shell PLC ADR | Chevron Corp vs. BP PLC ADR | Chevron Corp vs. Equinor ASA ADR | Chevron Corp vs. Petrleo Brasileiro SA |
| Equinor ASA vs. Shell PLC ADR | Equinor ASA vs. BP PLC ADR | Equinor ASA vs. Eni SpA ADR | Equinor ASA vs. Galp Energa |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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