Correlation Between Constellium and Chevron Corp

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Can any of the company-specific risk be diversified away by investing in both Constellium 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 Constellium and Chevron Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Constellium Nv and Chevron Corp, you can compare the effects of market volatilities on Constellium 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 Constellium with a short position of Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellium and Chevron Corp.

Diversification Opportunities for Constellium and Chevron Corp

0.09
  Correlation Coefficient

Significant diversification

The 3 months correlation between Constellium and Chevron is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Constellium Nv and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp and Constellium 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 Constellium Nv 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 Constellium i.e., Constellium and Chevron Corp go up and down completely randomly.

Pair Corralation between Constellium and Chevron Corp

Given the investment horizon of 90 days Constellium Nv is expected to generate 1.6 times more return on investment than Chevron Corp. However, Constellium is 1.6 times more volatile than Chevron Corp. It trades about 0.06 of its potential returns per unit of risk. Chevron Corp is currently generating about 0.01 per unit of risk. If you would invest  1,437  in Constellium Nv on March 21, 2024 and sell it today you would earn a total of  557.00  from holding Constellium Nv or generate 38.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy99.68%
ValuesDaily Returns

Constellium Nv  vs.  Chevron Corp

 Performance 
       Timeline  
Constellium Nv 

Risk-Adjusted Performance

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Over the last 90 days Constellium Nv has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Constellium is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
Chevron Corp 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Chevron Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chevron Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Constellium and Chevron Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Constellium and Chevron Corp

The main advantage of trading using opposite Constellium and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellium 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 Constellium Nv 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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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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