Correlation Between C Mer and Chevron Corp
Can any of the company-specific risk be diversified away by investing in both C Mer 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 C Mer and Chevron Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between C Mer Industries and Chevron Corp, you can compare the effects of market volatilities on C Mer 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 C Mer with a short position of Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of C Mer and Chevron Corp.
Diversification Opportunities for C Mer and Chevron Corp
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CMER and Chevron is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding C Mer Industries and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp and C Mer 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 C Mer Industries 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 C Mer i.e., C Mer and Chevron Corp go up and down completely randomly.
Pair Corralation between C Mer and Chevron Corp
Assuming the 90 days trading horizon C Mer Industries is expected to generate 2.5 times more return on investment than Chevron Corp. However, C Mer is 2.5 times more volatile than Chevron Corp. It trades about 0.05 of its potential returns per unit of risk. Chevron Corp is currently generating about 0.01 per unit of risk. If you would invest 66,890 in C Mer Industries on January 24, 2024 and sell it today you would earn a total of 47,910 from holding C Mer Industries or generate 71.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 78.79% |
| Values | Daily Returns |
C Mer Industries vs. Chevron Corp
Performance |
| Timeline |
| C Mer Industries |
| Chevron Corp |
C Mer and Chevron Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with C Mer and Chevron Corp
The main advantage of trading using opposite C Mer and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if C Mer 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 C Mer Industries 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.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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