Correlation Between EOG Resources and Chevron Corp
Can any of the company-specific risk be diversified away by investing in both EOG Resources 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 EOG Resources and Chevron Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EOG Resources and Chevron Corp, you can compare the effects of market volatilities on EOG Resources 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 EOG Resources with a short position of Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of EOG Resources and Chevron Corp.
Diversification Opportunities for EOG Resources and Chevron Corp
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between EOG and Chevron is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding EOG Resources and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp and EOG Resources 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 EOG Resources 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 EOG Resources i.e., EOG Resources and Chevron Corp go up and down completely randomly.
Pair Corralation between EOG Resources and Chevron Corp
Considering the 90-day investment horizon EOG Resources is expected to generate 1.23 times more return on investment than Chevron Corp. However, EOG Resources is 1.23 times more volatile than Chevron Corp. It trades about 0.32 of its potential returns per unit of risk. Chevron Corp is currently generating about 0.24 per unit of risk. If you would invest 12,639 in EOG Resources on January 25, 2024 and sell it today you would earn a total of 841.00 from holding EOG Resources or generate 6.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
EOG Resources vs. Chevron Corp
Performance |
| Timeline |
| EOG Resources |
| Chevron Corp |
EOG Resources and Chevron Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EOG Resources and Chevron Corp
The main advantage of trading using opposite EOG Resources and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EOG Resources 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.| EOG Resources vs. Pioneer Natural Resources | EOG Resources vs. Permian Resources | EOG Resources vs. Devon Energy | EOG Resources vs. Coterra Energy |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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