Correlation Between Chevron Corp and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both Chevron Corp and Verizon Communications 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 Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and Verizon Communications, you can compare the effects of market volatilities on Chevron Corp and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Verizon Communications.
Diversification Opportunities for Chevron Corp and Verizon Communications
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Chevron and Verizon is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Chevron Corp i.e., Chevron Corp and Verizon Communications go up and down completely randomly.
Pair Corralation between Chevron Corp and Verizon Communications
Considering the 90-day investment horizon Chevron Corp is expected to generate 0.52 times more return on investment than Verizon Communications. However, Chevron Corp is 1.94 times less risky than Verizon Communications. It trades about 0.33 of its potential returns per unit of risk. Verizon Communications is currently generating about -0.05 per unit of risk. If you would invest 15,527 in Chevron Corp on January 26, 2024 and sell it today you would earn a total of 830.00 from holding Chevron Corp or generate 5.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chevron Corp vs. Verizon Communications
Performance |
| Timeline |
| Chevron Corp |
| Verizon Communications |
Chevron Corp and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chevron Corp and Verizon Communications
The main advantage of trading using opposite Chevron Corp and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.| Chevron Corp vs. BP PLC ADR | Chevron Corp vs. Shell PLC ADR | Chevron Corp vs. Petroleo Brasileiro Petrobras | Chevron Corp vs. Suncor Energy |
| Verizon Communications vs. T Mobile | Verizon Communications vs. Lumen Technologies | Verizon Communications vs. Comcast Corp | Verizon Communications vs. ATT Inc |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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