Correlation Between Chevron Corp and BankFirst Capital

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

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

Diversification Opportunities for Chevron Corp and BankFirst Capital

0.64

Correlation Coefficient

Chevron Corp  BankFirst Capital

Poor diversification

The 3 months correlation between Chevron and BankFirst is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and BankFirst Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankFirst Capital 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 BankFirst Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankFirst Capital has no effect on the direction of Chevron Corp i.e., Chevron Corp and BankFirst Capital go up and down completely randomly.

Pair Corralation between Chevron Corp and BankFirst Capital

Considering the 90-day investment horizon Chevron Corp is expected to under-perform the BankFirst Capital. But the stock apears to be less risky and, when comparing its historical volatility, Chevron Corp is 1.35 times less risky than BankFirst Capital. The stock trades about -0.33 of its potential returns per unit of risk. The BankFirst Capital is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  3,723  in BankFirst Capital on September 18, 2024 and sell it today you would earn a total of  477.00  from holding BankFirst Capital or generate 12.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Chevron Corp  vs.  BankFirst Capital

Chevron Corp

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 4 (%) 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.

BankFirst Capital

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BankFirst Capital are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, BankFirst Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Chevron Corp and BankFirst Capital

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

The idea behind Chevron Corp and BankFirst Capital 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.