Correlation Between Retirement Living and Chevron Corp

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

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

Diversification Opportunities for Retirement Living and Chevron Corp

0.41

Correlation Coefficient

Retirement Living  Chevron Corp

Very weak diversification

The 3 months correlation between Retirement and Chevron is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Retirement Living Through and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp and Retirement Living 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 Retirement Living Through 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 Retirement Living i.e., Retirement Living and Chevron Corp go up and down completely randomly.

Pair Corralation between Retirement Living and Chevron Corp

Assuming the 90 days horizon Retirement Living Through is expected to under-perform the Chevron Corp. But the mutual fund apears to be less risky and, when comparing its historical volatility, Retirement Living Through is 1.4 times less risky than Chevron Corp. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Chevron Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  14,888  in Chevron Corp on February 3, 2024 and sell it today you would earn a total of  1,185  from holding Chevron Corp or generate 7.96% return on investment over 90 days.

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

Retirement Living Through  vs.  Chevron Corp

Retirement Living Through

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Retirement Living Through are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Retirement Living is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chevron Corp

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Retirement Living and Chevron Corp

The main advantage of trading using opposite Retirement Living and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retirement Living 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 Retirement Living Through 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.