Correlation Between Chevron Corp and Disney
Can any of the company-specific risk be diversified away by investing in both Chevron Corp and Disney 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 Disney into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and Walt Disney, you can compare the effects of market volatilities on Chevron Corp and Disney 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 Disney. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Disney.
Diversification Opportunities for Chevron Corp and Disney
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Chevron and Disney is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney 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 Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of Chevron Corp i.e., Chevron Corp and Disney go up and down completely randomly.
Pair Corralation between Chevron Corp and Disney
Considering the 90-day investment horizon Chevron Corp is expected to generate 2.63 times less return on investment than Disney. But when comparing it to its historical volatility, Chevron Corp is 1.27 times less risky than Disney. It trades about 0.02 of its potential returns per unit of risk. Walt Disney is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 9,822 in Walt Disney on January 25, 2024 and sell it today you would earn a total of 1,549 from holding Walt Disney or generate 15.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chevron Corp vs. Walt Disney
Performance |
| Timeline |
| Chevron Corp |
| Walt Disney |
Chevron Corp and Disney Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chevron Corp and Disney
The main advantage of trading using opposite Chevron Corp and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, Disney 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 Disney will offset losses from the drop in Disney's long position.The idea behind Chevron Corp and Walt Disney 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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