Correlation Between Canadian Utilities and CHEVRON CDR

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

By analyzing existing cross correlation between Canadian Utilities Limited and CHEVRON CDR, you can compare the effects of market volatilities on Canadian Utilities and CHEVRON CDR 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 Canadian Utilities with a short position of CHEVRON CDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and CHEVRON CDR.

Diversification Opportunities for Canadian Utilities and CHEVRON CDR

0.31

Correlation Coefficient

Canadian Utilities  CHEVRON CDR

Weak diversification

The 3 months correlation between Canadian and CHEVRON is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and CHEVRON CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHEVRON CDR and Canadian Utilities 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 Canadian Utilities Limited are associated (or correlated) with CHEVRON CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHEVRON CDR has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and CHEVRON CDR go up and down completely randomly.

Pair Corralation between Canadian Utilities and CHEVRON CDR

Assuming the 90 days horizon Canadian Utilities is expected to generate 6.19 times less return on investment than CHEVRON CDR. But when comparing it to its historical volatility, Canadian Utilities Limited is 1.3 times less risky than CHEVRON CDR. It trades about 0.03 of its potential returns per unit of risk. CHEVRON CDR is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,867  in CHEVRON CDR on September 13, 2024 and sell it today you would earn a total of  222.00  from holding CHEVRON CDR or generate 11.89% return on investment over 90 days.

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

Canadian Utilities Limited  vs.  CHEVRON CDR

Canadian Utilities

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Utilities Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Canadian Utilities is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

CHEVRON CDR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHEVRON CDR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, CHEVRON CDR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Canadian Utilities and CHEVRON CDR

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

The idea behind Canadian Utilities Limited and CHEVRON CDR 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..