Correlation Between SPACE and Chevron Corp

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

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

Diversification Opportunities for SPACE and Chevron Corp

0.79

Correlation Coefficient

SPACE  Chevron Corp

Poor diversification

The 3 months correlation between SPACE and Chevron is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding SPACE and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp and SPACE 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 SPACE are associated (or correlated) with Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of SPACE i.e., SPACE and Chevron Corp go up and down completely randomly.

Pair Corralation between SPACE and Chevron Corp

Assuming the 90 days horizon SPACE is expected to generate 4.23 times more return on investment than Chevron Corp. However, SPACE is 4.23 times more volatile than Chevron Corp. It trades about 0.2 of its potential returns per unit of risk. Chevron Corp is currently generating about 0.17 per unit of risk. If you would invest  34.00  in SPACE on September 3, 2024 and sell it today you would earn a total of  25.00  from holding SPACE or generate 73.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

SPACE  vs.  Chevron Corp

SPACE

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPACE are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SPACE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Chevron Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SPACE and Chevron Corp

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

The idea behind SPACE and Chevron Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.