Correlation Between Chevron Corp and Canadian Overseas

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

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

Diversification Opportunities for Chevron Corp and Canadian Overseas

-0.83

Correlation Coefficient

Chevron Corp  Canadian Overseas

Pay attention - limited upside

The 3 months correlation between Chevron and Canadian is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Canadian Overseas Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Overseas 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 Canadian Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Overseas has no effect on the direction of Chevron Corp i.e., Chevron Corp and Canadian Overseas go up and down completely randomly.

Pair Corralation between Chevron Corp and Canadian Overseas

If you would invest  14,196  in Chevron Corp on September 17, 2024 and sell it today you would earn a total of  740.00  from holding Chevron Corp or generate 5.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	1.54%
Values	Daily Returns

Chevron Corp  vs.  Canadian Overseas Petroleum

Chevron Corp

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 5 (%) 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.

Canadian Overseas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Overseas Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Canadian Overseas is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Chevron Corp and Canadian Overseas

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

The idea behind Chevron Corp and Canadian Overseas Petroleum 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.