Correlation Between Boliden AB and Chevron Corp

Can any of the company-specific risk be diversified away by investing in both Boliden AB 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 Boliden AB and Chevron Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Boliden AB ADR and Chevron Corp, you can compare the effects of market volatilities on Boliden AB 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 Boliden AB with a short position of Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boliden AB and Chevron Corp.

Diversification Opportunities for Boliden AB and Chevron Corp

0.45

Correlation Coefficient

Boliden AB Chevron Corp

Very weak diversification

The 3 months correlation between Boliden and Chevron is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Boliden AB ADR and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp and Boliden AB 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 Boliden AB ADR 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 Boliden AB i.e., Boliden AB and Chevron Corp go up and down completely randomly.

Pair Corralation between Boliden AB and Chevron Corp

Assuming the 90 days horizon Boliden AB is expected to generate 1.56 times less return on investment than Chevron Corp. In addition to that, Boliden AB is 1.56 times more volatile than Chevron Corp. It trades about 0.03 of its total potential returns per unit of risk. Chevron Corp is currently generating about 0.06 per unit of volatility. If you would invest  9,636  in Chevron Corp on December 23, 2022 and sell it today you would earn a total of  5,900  from holding Chevron Corp or generate 61.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.59%
Values	Daily Returns

Boliden AB ADR  vs.  Chevron Corp

Boliden AB ADR

Boliden Performance

1 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Boliden AB ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Boliden AB is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Chevron Corp

Chevron Performance

0 of 100

Over the last 90 days Chevron Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Boliden AB and Chevron Corp

The main advantage of trading using opposite Boliden AB and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boliden AB 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.

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The idea behind Boliden AB ADR 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.