Correlation Between Chevron Corp and Discipline Fund

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

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

Diversification Opportunities for Chevron Corp and Discipline Fund

0.31

Correlation Coefficient

Chevron Corp  Discipline Fund

Weak diversification

The 3 months correlation between Chevron and Discipline is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Discipline Fund ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discipline Fund ETF 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 Discipline Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discipline Fund ETF has no effect on the direction of Chevron Corp i.e., Chevron Corp and Discipline Fund go up and down completely randomly.

Pair Corralation between Chevron Corp and Discipline Fund

Considering the 90-day investment horizon Chevron Corp is expected to generate 3.62 times less return on investment than Discipline Fund. In addition to that, Chevron Corp is 3.13 times more volatile than Discipline Fund ETF. It trades about 0.01 of its total potential returns per unit of risk. Discipline Fund ETF is currently generating about 0.14 per unit of volatility. If you would invest  2,268  in Discipline Fund ETF on February 22, 2025 and sell it today you would earn a total of  27.00  from holding Discipline Fund ETF or generate 1.19% return on investment over 90 days.

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

Chevron Corp  vs.  Discipline Fund ETF

Chevron Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chevron Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Discipline Fund ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Discipline Fund ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Discipline Fund 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 Discipline Fund

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

The idea behind Chevron Corp and Discipline Fund ETF 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.