Correlation Between Chevron Corp and Fidelity Focused

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

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

Diversification Opportunities for Chevron Corp and Fidelity Focused

0.82

Correlation Coefficient

Chevron Corp  Fidelity Focused

Very poor diversification

The 3 months correlation between Chevron and Fidelity is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Fidelity Focused Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Focused Stock 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 Fidelity Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Focused Stock has no effect on the direction of Chevron Corp i.e., Chevron Corp and Fidelity Focused go up and down completely randomly.

Pair Corralation between Chevron Corp and Fidelity Focused

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.14 times more return on investment than Fidelity Focused. However, Chevron Corp is 1.14 times more volatile than Fidelity Focused Stock. It trades about 0.21 of its potential returns per unit of risk. Fidelity Focused Stock is currently generating about 0.21 per unit of risk. 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	Strong
Accuracy	100.0%
Values	Daily Returns

Chevron Corp  vs.  Fidelity Focused Stock

Chevron Corp

Risk-Adjusted Performance

16 of 100

Solid

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 weak basic indicators, Chevron Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Fidelity Focused Stock

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Focused Stock are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Fidelity Focused showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chevron Corp and Fidelity Focused

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

The idea behind Chevron Corp and Fidelity Focused Stock 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.