Correlation Between CHEVRON CDR and Automotive Properties

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

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

Diversification Opportunities for CHEVRON CDR and Automotive Properties

-0.58

Correlation Coefficient

CHEVRON CDR  Automotive Properties

Excellent diversification

The 3 months correlation between CHEVRON and Automotive is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding CHEVRON CDR and Automotive Properties Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automotive Properties and CHEVRON CDR 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 CDR are associated (or correlated) with Automotive Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automotive Properties has no effect on the direction of CHEVRON CDR i.e., CHEVRON CDR and Automotive Properties go up and down completely randomly.

Pair Corralation between CHEVRON CDR and Automotive Properties

Assuming the 90 days trading horizon CHEVRON CDR is expected to generate 1.04 times more return on investment than Automotive Properties. However, CHEVRON CDR is 1.04 times more volatile than Automotive Properties Real. It trades about 0.01 of its potential returns per unit of risk. Automotive Properties Real is currently generating about -0.02 per unit of risk. If you would invest  2,168  in CHEVRON CDR on February 3, 2024 and sell it today you would earn a total of  5.00  from holding CHEVRON CDR or generate 0.23% return on investment over 90 days.

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

CHEVRON CDR  vs.  Automotive Properties Real

CHEVRON CDR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHEVRON CDR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, CHEVRON CDR may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Automotive Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Automotive Properties Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Automotive Properties 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 CDR and Automotive Properties

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

The idea behind CHEVRON CDR and Automotive Properties Real 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.