Correlation Between SWISS WATER and Chevron

Can any of the company-specific risk be diversified away by investing in both SWISS WATER and Chevron 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 SWISS WATER and Chevron into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SWISS WATER DECAFFCOFFEE and Chevron, you can compare the effects of market volatilities on SWISS WATER and Chevron 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 SWISS WATER with a short position of Chevron. Check out your portfolio center. Please also check ongoing floating volatility patterns of SWISS WATER and Chevron.

Diversification Opportunities for SWISS WATER and Chevron

0.82

Correlation Coefficient

SWISS WATER  Chevron

Very poor diversification

The 3 months correlation between SWISS and Chevron is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and Chevron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron and SWISS WATER 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 SWISS WATER DECAFFCOFFEE are associated (or correlated) with Chevron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron has no effect on the direction of SWISS WATER i.e., SWISS WATER and Chevron go up and down completely randomly.

Pair Corralation between SWISS WATER and Chevron

Assuming the 90 days horizon SWISS WATER DECAFFCOFFEE is expected to generate 1.88 times more return on investment than Chevron. However, SWISS WATER is 1.88 times more volatile than Chevron. It trades about 0.12 of its potential returns per unit of risk. Chevron is currently generating about 0.22 per unit of risk. If you would invest  230.00  in SWISS WATER DECAFFCOFFEE on September 4, 2024 and sell it today you would earn a total of  42.00  from holding SWISS WATER DECAFFCOFFEE or generate 18.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

SWISS WATER DECAFFCOFFEE  vs.  Chevron

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SWISS WATER DECAFFCOFFEE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SWISS WATER reported solid returns over the last few months and may actually be approaching a breakup point.

Chevron

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Chevron unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SWISS WATER and Chevron

The main advantage of trading using opposite SWISS WATER and Chevron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SWISS WATER position performs unexpectedly, Chevron 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 Chevron will offset losses from the drop in Chevron's long position.

The idea behind SWISS WATER DECAFFCOFFEE and Chevron 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.

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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.