Correlation Between Chevron Corp and Acreage Holdings

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

By analyzing existing cross correlation between Chevron Corp and Acreage Holdings, you can compare the effects of market volatilities on Chevron Corp and Acreage Holdings 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 Acreage Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Acreage Holdings.

Diversification Opportunities for Chevron Corp and Acreage Holdings

-0.34

Correlation Coefficient

Chevron Corp  Acreage Holdings

Very good diversification

The 3 months correlation between Chevron and Acreage is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Acreage Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acreage Holdings 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 Acreage Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acreage Holdings has no effect on the direction of Chevron Corp i.e., Chevron Corp and Acreage Holdings go up and down completely randomly.

Pair Corralation between Chevron Corp and Acreage Holdings

Considering the 90-day investment horizon Chevron Corp is expected to generate 6.19 times less return on investment than Acreage Holdings. But when comparing it to its historical volatility, Chevron Corp is 11.82 times less risky than Acreage Holdings. It trades about 0.04 of its potential returns per unit of risk. Acreage Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Acreage Holdings on September 20, 2024 and sell it today you would lose (6.00) from holding Acreage Holdings or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Chevron Corp  vs.  Acreage Holdings

Chevron Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Chevron Corp is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Acreage Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Acreage Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Acreage Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chevron Corp and Acreage Holdings

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

The idea behind Chevron Corp and Acreage Holdings 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.