Correlation Between Chevron Corp and Adams Resources

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

By analyzing existing cross correlation between Chevron Corp and Adams Resources Energy, you can compare the effects of market volatilities on Chevron Corp and Adams Resources 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 Adams Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Adams Resources.

Diversification Opportunities for Chevron Corp and Adams Resources

0.81

Correlation Coefficient

Chevron Corp  Adams Resources

Very poor diversification

The 1 month correlation between Chevron and Adams is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Adams Resources Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adams Resources Energy 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 Adams Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adams Resources Energy has no effect on the direction of Chevron Corp i.e., Chevron Corp and Adams Resources go up and down completely randomly.

Pair Corralation between Chevron Corp and Adams Resources

Considering the 90-day investment horizon Chevron Corp is expected to generate 7.01 times less return on investment than Adams Resources. But when comparing it to its historical volatility, Chevron Corp is 3.32 times less risky than Adams Resources. It trades about 0.13 of its potential returns per unit of risk. Adams Resources Energy is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  2,567  in Adams Resources Energy on January 20, 2024 and sell it today you would earn a total of  385.00  from holding Adams Resources Energy or generate 15.0% return on investment over 90 days.

Time Period	1 Month [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Chevron Corp  vs.  Adams Resources Energy

Chevron Corp

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. 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.

Adams Resources Energy

Risk-Adjusted Performance

21 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Resources Energy are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Adams Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chevron Corp and Adams Resources

The main advantage of trading using opposite Chevron Corp and Adams Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, Adams Resources 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 Adams Resources will offset losses from the drop in Adams Resources' long position.

The idea behind Chevron Corp and Adams Resources Energy 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.