Correlation Between Chevron Corp and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Chevron Corp and Northern Lights 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 Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and Northern Lights, you can compare the effects of market volatilities on Chevron Corp and Northern Lights 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 Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Northern Lights.
Diversification Opportunities for Chevron Corp and Northern Lights
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Chevron and Northern is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Chevron Corp i.e., Chevron Corp and Northern Lights go up and down completely randomly.
Pair Corralation between Chevron Corp and Northern Lights
Considering the 90-day investment horizon Chevron Corp is expected to generate 2.66 times more return on investment than Northern Lights. However, Chevron Corp is 2.66 times more volatile than Northern Lights. It trades about 0.39 of its potential returns per unit of risk. Northern Lights is currently generating about 0.07 per unit of risk. If you would invest 14,702 in Chevron Corp on August 30, 2024 and sell it today you would earn a total of 1,509 from holding Chevron Corp or generate 10.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chevron Corp vs. Northern Lights
Performance |
| Timeline |
| Chevron Corp |
| Northern Lights |
Chevron Corp and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chevron Corp and Northern Lights
The main advantage of trading using opposite Chevron Corp and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' 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 |
| Northern Lights vs. Inspire SmallMid Cap | Northern Lights vs. Inspire Global Hope | Northern Lights vs. Northern Lights | Northern Lights vs. Inspire International ESG |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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