Correlation Between Chevron Corp and International Petroleum
Can any of the company-specific risk be diversified away by investing in both Chevron Corp and International Petroleum 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 International Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and International Petroleum, you can compare the effects of market volatilities on Chevron Corp and International Petroleum 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 International Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and International Petroleum.
Diversification Opportunities for Chevron Corp and International Petroleum
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Chevron and International is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and International Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Petroleum 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 International Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Petroleum has no effect on the direction of Chevron Corp i.e., Chevron Corp and International Petroleum go up and down completely randomly.
Pair Corralation between Chevron Corp and International Petroleum
Considering the 90-day investment horizon Chevron Corp is expected to generate 0.45 times more return on investment than International Petroleum. However, Chevron Corp is 2.23 times less risky than International Petroleum. It trades about 0.29 of its potential returns per unit of risk. International Petroleum is currently generating about -0.04 per unit of risk. 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 Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chevron Corp vs. International Petroleum
Performance |
| Timeline |
| Chevron Corp |
| International Petroleum |
Chevron Corp and International Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chevron Corp and International Petroleum
The main advantage of trading using opposite Chevron Corp and International Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, International Petroleum 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 International Petroleum will offset losses from the drop in International Petroleum's long position.The idea behind Chevron Corp and International Petroleum 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.| International Petroleum vs. 1st NRG Corp | International Petroleum vs. Otto Energy Limited | International Petroleum vs. Razor Energy Corp | International Petroleum vs. Prospera Energy |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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