Correlation Between NIPPON PROLOGIS and Chevron

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

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

Diversification Opportunities for NIPPON PROLOGIS and Chevron

-0.61

Correlation Coefficient

NIPPON PROLOGIS  Chevron

Excellent diversification

The 3 months correlation between NIPPON and Chevron is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding NIPPON PROLOGIS REIT and Chevron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron and NIPPON PROLOGIS 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 NIPPON PROLOGIS REIT 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 NIPPON PROLOGIS i.e., NIPPON PROLOGIS and Chevron go up and down completely randomly.

Pair Corralation between NIPPON PROLOGIS and Chevron

Assuming the 90 days trading horizon NIPPON PROLOGIS REIT is expected to under-perform the Chevron. In addition to that, NIPPON PROLOGIS is 1.07 times more volatile than Chevron. It trades about -0.05 of its total potential returns per unit of risk. Chevron is currently generating about 0.03 per unit of volatility. If you would invest  13,123  in Chevron on September 12, 2024 and sell it today you would earn a total of  1,811  from holding Chevron or generate 13.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

NIPPON PROLOGIS REIT  vs.  Chevron

NIPPON PROLOGIS REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIPPON PROLOGIS REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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. Despite nearly fragile basic indicators, Chevron reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NIPPON PROLOGIS and Chevron

The main advantage of trading using opposite NIPPON PROLOGIS and Chevron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NIPPON PROLOGIS 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 NIPPON PROLOGIS REIT 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 Stocks Directory module to find actively traded stocks across global markets.