Correlation Between Chevron Corp and Aurania Resources

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

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

Diversification Opportunities for Chevron Corp and Aurania Resources

-0.52

Correlation Coefficient

Chevron Corp  Aurania Resources

Excellent diversification

The 3 months correlation between Chevron and Aurania is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Aurania Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurania Resources 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 Aurania Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurania Resources has no effect on the direction of Chevron Corp i.e., Chevron Corp and Aurania Resources go up and down completely randomly.

Pair Corralation between Chevron Corp and Aurania Resources

Considering the 90-day investment horizon Chevron Corp is expected to generate 0.17 times more return on investment than Aurania Resources. However, Chevron Corp is 5.76 times less risky than Aurania Resources. It trades about 0.18 of its potential returns per unit of risk. Aurania Resources is currently generating about -0.05 per unit of risk. If you would invest  14,320  in Chevron Corp on August 31, 2024 and sell it today you would earn a total of  1,891  from holding Chevron Corp or generate 13.21% return on investment over 90 days.

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

Chevron Corp  vs.  Aurania Resources

Chevron Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly sluggish basic indicators, Chevron Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Aurania Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurania Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Chevron Corp and Aurania Resources

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

The idea behind Chevron Corp and Aurania Resources 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.