Correlation Between Chevron Corp and Jadeart

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

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

Diversification Opportunities for Chevron Corp and Jadeart

-0.47

Correlation Coefficient

Chevron Corp  Jadeart

Very good diversification

The 3 months correlation between Chevron and Jadeart is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Jadeart Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jadeart Group 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 Jadeart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jadeart Group has no effect on the direction of Chevron Corp i.e., Chevron Corp and Jadeart go up and down completely randomly.

Pair Corralation between Chevron Corp and Jadeart

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.3 times less return on investment than Jadeart. But when comparing it to its historical volatility, Chevron Corp is 18.95 times less risky than Jadeart. It trades about 0.29 of its potential returns per unit of risk. Jadeart Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  0.42  in Jadeart Group on September 4, 2024 and sell it today you would lose (0.10) from holding Jadeart Group or give up 23.81% of portfolio value over 90 days.

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

Chevron Corp  vs.  Jadeart Group

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.

Jadeart Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jadeart Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Jadeart sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chevron Corp and Jadeart

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

The idea behind Chevron Corp and Jadeart Group 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.