Correlation Between Chevron Corp and Frontline

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

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

Diversification Opportunities for Chevron Corp and Frontline

0.52

Correlation Coefficient

Chevron Corp  Frontline

Very weak diversification

The 3 months correlation between Chevron and Frontline is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Frontline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontline 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 Frontline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontline has no effect on the direction of Chevron Corp i.e., Chevron Corp and Frontline go up and down completely randomly.

Pair Corralation between Chevron Corp and Frontline

Considering the 90-day investment horizon Chevron Corp is expected to under-perform the Frontline. But the stock apears to be less risky and, when comparing its historical volatility, Chevron Corp is 2.11 times less risky than Frontline. The stock trades about -0.01 of its potential returns per unit of risk. The Frontline is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  988.00  in Frontline on July 21, 2024 and sell it today you would earn a total of  1,223  from holding Frontline or generate 123.79% return on investment over 90 days.

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

Chevron Corp  vs.  Frontline

Chevron Corp

Risk-Adjusted Performance

0 of 100

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 fairly strong basic indicators, Chevron Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Frontline

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frontline has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Chevron Corp and Frontline

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

The idea behind Chevron Corp and Frontline 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.