Correlation Between VMware and Chevron Corp
Can any of the company-specific risk be diversified away by investing in both VMware 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 VMware and Chevron Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VMware Inc and Chevron Corp, you can compare the effects of market volatilities on VMware 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 VMware with a short position of Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of VMware and Chevron Corp.
Diversification Opportunities for VMware and Chevron Corp
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between VMware and Chevron is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding VMware Inc and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp and VMware 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 VMware Inc 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 VMware i.e., VMware and Chevron Corp go up and down completely randomly.
Pair Corralation between VMware and Chevron Corp
Considering the 90-day investment horizon VMware Inc is expected to generate 1.53 times more return on investment than Chevron Corp. However, VMware is 1.53 times more volatile than Chevron Corp. It trades about 0.07 of its potential returns per unit of risk. Chevron Corp is currently generating about 0.02 per unit of risk. If you would invest 12,405 in VMware Inc on January 19, 2024 and sell it today you would earn a total of 1,843 from holding VMware Inc or generate 14.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 55.95% |
| Values | Daily Returns |
VMware Inc vs. Chevron Corp
Performance |
| Timeline |
| VMware Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Chevron Corp |
VMware and Chevron Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VMware and Chevron Corp
The main advantage of trading using opposite VMware and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VMware 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 VMware Inc 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.| Chevron Corp vs. BP PLC ADR | Chevron Corp vs. Shell PLC ADR | Chevron Corp vs. Petroleo Brasileiro Petrobras | Chevron Corp vs. Suncor 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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