Correlation Between Chevron Corp and East Resources

Can any of the company-specific risk be diversified away by investing in both Chevron Corp and East 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 East 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 East Resources Acquisition, you can compare the effects of market volatilities on Chevron Corp and East 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 East Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and East Resources.

Diversification Opportunities for Chevron Corp and East Resources

0.61

Correlation Coefficient

Chevron Corp  East Resources

Poor diversification

The 3 months correlation between Chevron and East is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and East Resources Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Resources Acqui 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 East Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Resources Acqui has no effect on the direction of Chevron Corp i.e., Chevron Corp and East Resources go up and down completely randomly.

Pair Corralation between Chevron Corp and East Resources

If you would invest  14,064  in Chevron Corp on September 4, 2024 and sell it today you would earn a total of  2,157  from holding Chevron Corp or generate 15.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Chevron Corp  vs.  East Resources Acquisition

Chevron Corp

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Chevron Corp showed solid returns over the last few months and may actually be approaching a breakup point.

East Resources Acqui

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days East Resources Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, East Resources is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Chevron Corp and East Resources

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

The idea behind Chevron Corp and East Resources Acquisition 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.