Correlation Between Chevron Corp and FlexShares IBoxx
Can any of the company-specific risk be diversified away by investing in both Chevron Corp and FlexShares IBoxx 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 FlexShares IBoxx into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and FlexShares iBoxx 5 Year, you can compare the effects of market volatilities on Chevron Corp and FlexShares IBoxx 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 FlexShares IBoxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and FlexShares IBoxx.
Diversification Opportunities for Chevron Corp and FlexShares IBoxx
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Chevron and FlexShares is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and FlexShares iBoxx 5 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares iBoxx 5 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 FlexShares IBoxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares iBoxx 5 has no effect on the direction of Chevron Corp i.e., Chevron Corp and FlexShares IBoxx go up and down completely randomly.
Pair Corralation between Chevron Corp and FlexShares IBoxx
Considering the 90-day investment horizon Chevron Corp is expected to generate 4.7 times more return on investment than FlexShares IBoxx. However, Chevron Corp is 4.7 times more volatile than FlexShares iBoxx 5 Year. It trades about 0.05 of its potential returns per unit of risk. FlexShares iBoxx 5 Year is currently generating about 0.08 per unit of risk. If you would invest 14,732 in Chevron Corp on August 27, 2024 and sell it today you would earn a total of 1,504 from holding Chevron Corp or generate 10.21% 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. FlexShares iBoxx 5 Year
Performance |
| Timeline |
| Chevron Corp |
| FlexShares iBoxx 5 |
Chevron Corp and FlexShares IBoxx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chevron Corp and FlexShares IBoxx
The main advantage of trading using opposite Chevron Corp and FlexShares IBoxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, FlexShares IBoxx 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 FlexShares IBoxx will offset losses from the drop in FlexShares IBoxx's long position.The idea behind Chevron Corp and FlexShares iBoxx 5 Year 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.| FlexShares IBoxx vs. PIMCO 1 5 Year | FlexShares IBoxx vs. SPDR Bloomberg 1 10 | FlexShares IBoxx vs. FlexShares iBoxx 3 Year |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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