Correlation Between Chevron Corp and APPLE

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

By analyzing existing cross correlation between Chevron Corp and APPLE INC 25, you can compare the effects of market volatilities on Chevron Corp and APPLE 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 APPLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and APPLE.

Diversification Opportunities for Chevron Corp and APPLE

-0.51

Correlation Coefficient

Chevron Corp  APPLE

Excellent diversification

The 3 months correlation between Chevron and APPLE is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and APPLE INC 25 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLE INC 25 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 APPLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APPLE INC 25 has no effect on the direction of Chevron Corp i.e., Chevron Corp and APPLE go up and down completely randomly.

Pair Corralation between Chevron Corp and APPLE

Considering the 90-day investment horizon Chevron Corp is expected to generate 2.51 times more return on investment than APPLE. However, Chevron Corp is 2.51 times more volatile than APPLE INC 25. It trades about 0.14 of its potential returns per unit of risk. APPLE INC 25 is currently generating about -0.1 per unit of risk. If you would invest  14,646  in Chevron Corp on August 30, 2024 and sell it today you would earn a total of  1,565  from holding Chevron Corp or generate 10.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Chevron Corp  vs.  APPLE INC 25

Chevron Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

APPLE INC 25

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APPLE INC 25 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, APPLE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chevron Corp and APPLE

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

The idea behind Chevron Corp and APPLE INC 25 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.